The Pros and Cons of Soda Taxes

With the recent passage of Obama’s health care reform bill, two topics have been in the news frequently: tax increases and the health of American citizens. One such tax increase is the so called “soda tax” which have been mentioned in Congress multiple times over the past few years; however, they have been unsuccessful in beening passed into law on a national level. With so many myths, and opinions about soda taxes being published online I decided to put together this blog entry explaining both the pros and cons so that my readers could make their own decisions about the possibility of a tax on carbonated beverages.

Pro: Fight Obesity

One of the most prominent arguments for instituting a national soda tax is to provide incentive for Americans to eat and drink healthier products and thus decrease obesity. There are numerous medical associations that have publicly announced their support of taxes on sugary beverages and some have even conducted studies to examine the potential health benefits of such a tax. A study conducted between the years 1985 and 2006, involving over 5,000 patients, showed a direct correlation between higher soda prices and the average daily caloric intake of Americans. Their study found that when the cost of a can of soda increased by 10%, the average patient consumed 7.12% fewer calories per day.

Con: Little Affect on Obesity

For every expert standing behind a soda tax, there is another who opposes it. Although some studies link soda prices with caloric intake, other health experts claim that problems with moderate eating, and lack of physical activity are more to blame for the countries obesity problem than sodas. When discussing the issue Dr Pepper Snapple Group Inc (DPS.N) Chief Executive Larry Young even said "let's put warning labels on sofas, because that's where kids are sitting instead of (being) outside playing.”

Pro: Additional Federal Revenue

There is no denying the fact that the federal government is looking for ways to increase revenue. Currently, there are about a dozen local government agencies – including Kansas, Colorado, and the city of Philadelphia – that have or are likely to begin enforcing soda taxes. The soft drink industry takes in about $110 billion per year in American sales, and whether or not a soda tax will help improve the health of the country, it could generate additional federal revenue. With so much spending going on in Washington, Congress is considering almost anything to generate more revenue.

Con: Recycling Fees

A large reason that many government agencies are hesitant to institute soda taxes is the fear that it might have an effect on the tax levied on the cans, bottles, and glass containers that carbonated beverages are sold in. These taxes are used to promote recycling, not public health, and are not generally that controversial. However, some experts are worried that adding a soda tax, on top of a recycling fee, could cause consumers to question these taxes on recyclable containers.

Pro: Incentives for Soda Company

Even before soda taxes became a popular topic of conversation, PepsiCo and Coca-Cola have both been working on tactics to improve their appeal to the ever growing group of health conscious Americans. However, with soda taxes becoming a reality in dozens of places across the country, the pressure is on for soft drink makers to produce healthier products.

Recently, PepsiCo responded to this new demand by creating a Gatorade beverage with all natural coloring and flavoring to be featured in health stores later this year. The company has also announced long term plans to make all of their products healthier over the next decade. They will reportedly cut the average amount of sugar per serving by 25% and the saturated fat by 15% in all products.

Con: Consumer Rights

Like other “sin” taxes, many Americans are most upset by the idea of using a tax to promote public health. Consumers of carbonated beverages feel like it is their right to indulge in sugary beverages, and the lack of moderation exhibited by some does not mean the government should enforce a tax increase on every American. Additionally, in today’s tough economic times many families are struggling to put food on the table, and any taxes on these family’s grocery bill would surely be unwelcome.

Fight Obesity? Add Sales Tax to Soda Tab

From the Associated Press:

In a bid to ramp up the public health battle against obesity, a group of nutrition and economics experts are pushing for a tax of 1 cent on every of ounce of sodas and other sweetened beverages.

Proposals for a hefty soda tax though have repeatedly fallen flat. The idea was even floated as a way to help pay for health care reform, but government officials on Wednesday said that's not likely to happen.

The experts' plan was released by the influential New England Journal of Medicine, in a health policy article by Arkansas' surgeon general, New York City's health commissioner and five national experts on health and economics.

A soda tax would generate tax revenue while discouraging people from consuming extra calories, the authors contend. They cited a series of studies that showed higher rates of obesity and diabetes among women who drank more sugar-sweetened beverages. They argue that a steeper soda tax would borrow the same strategy that helped drive down cigarette smoking while bolstering government revenues.

But a golden opportunity for enacting a national soda tax apparently slipped away Wednesday, when the Senate Finance Committee released its health reform proposal without a previously considered soda tax provision.

Obama: Explore soda tax

From the Times Union.com:

In an interview with Men’s Health Magazine, President Barack Obama says that the government ought to explore the idea of taxing soda or other sugary drinks, using essentially the same arguments that Gov. David Paterson used when he was pushing for the soda tax — that soda contributes to obesity.

In the end, the public didn’t like the idea of the tax and Paterson took it off the table early on in the budget process.

Obama also acknowledges the political difficulty of passing such a tax.

From the story:

“I actually think it’s an idea that we should be exploring,” the president says. “There’s no doubt that our kids drink way too much soda. And every study that’s been done about obesity shows that there is as high a correlation between increased soda consumption and obesity as just about anything else. Obviously it’s not the only factor, but it is a major factor.”

But even the most powerful man on the planet needs to keep an eye on what’s politically feasible: “Obviously there is resistance on Capitol Hill to those kinds of sin taxes,” he says. “Legislators from certain states that produce sugar or corn syrup are sensitive to anything that might reduce demand for those products. And look, people’s attitude is that they don’t necessarily want Big Brother telling them what to eat or drink, and I understand that. It is true, though, that if you wanted to make a big impact on people’s health in this country, reducing things like soda consumption would be helpful.”

Soft Drink Makers Launch Anti-Tax Ads

From UPI.com:

U.S. soft drink makers say they have launched a $2 million advertising campaign to counter moves to fight obesity and fund health care by taxing sugary soda.

The American Beverage Association has joined forces with the National Restaurant Association and the Grocery Manufacturers Association to fight the consideration of any such taxes, building a coalition of groups called Americans Against Food Taxes, USA Today reported Monday.

The newspaper says the ads depict soft drinks as "simple pleasures" being subjected to grasping government bureaucrats.

"People view it as an overreach of government when the tax code is used to tell them what to eat and drink," Kevin Keane of the beverage association told USA Today, adding that such taxes would hurt low- and middle-income people most.

A Healthy Tax

From the NewYorkTimes.com:

The problem with obesity has become so overpowering in America that no single remedy guarantees a solution. But a proposal now being considered by some in Congress to tax drinks loaded with sugar would certainly help. The idea is that taxes worked to lower tobacco use — a habit far harder to break — so they should help young people limit their intake of soda or other forms of “liquid candy.”

Michael Jacobson, the executive director of the Center for Science in the Public Interest, a health advocacy group, has estimated that for every penny of tax added to a 12-ounce bottle or can of these drinks, consumption of all those empty calories would drop by 1 percent.

Those taxes also could raise money for health care, either to help finance the reform plan now being considered in Congress or to help fight the obesity epidemic. Americans spend about $50 billion a year on non-diet sodas — even more when counting sugared teas and sports drinks — so even a small tax would add up.

The beverage industry is gearing up to fight, and a recent win in New York State offers clues about its strategy. To fill huge budget gaps, Gov. David Paterson proposed an 18 percent tax on sugary drinks but scrapped the idea after lobbyists charged that a tax would land unfairly on lower-income families. That was enough for many politicians, who ignored the fact that too many of these same families suffer from obesity and its related problems, while lacking adequate access to health care.

Bigger fixes are needed, of course, starting with decent health care. The young need more exercise, healthier lunches and better education on nutrition. All consumers — not just those lucky enough to live near farms or large grocery stores — should be able to buy fresh fruits and vegetables at affordable prices. While we wait, Congress could impose an excise tax on sugary drinks — one of the main culprits in the obesity epidemic.

Senate Considers Federal Tax On Soda

From CBSNews.com:

The Senate Finance Committee today is hearing proposals on how to pay for President Obama's proposed universal health care plan, which is expected to cost more than $1 trillion. Among the proposals, as Consumer Affairs reports: A three-cent tax on sodas as well as other sugary drinks, including energy and sports drinks like Gatorade. Diet sodas would be exempt.

"While many factors promote weight gain, soft drinks are the only food or beverage that has been shown to increase the risk of overweight and obesity, which, in turn, increase the risk of diabetes, stroke, and many other health problems," Michael Jacobson of the Center for Science in the Public Interest, which is pushing the idea, said in his testimony. "Soft drinks are nutritionally worthless…[and] are directly related to weight gain, partly because beverages are more conducive to weight gain than solid foods."

According to Jacobson, "Beverage companies market more than 14 billion gallons of calorie-laden soft drinks annually. That is equivalent to about 506 12-oz. servings per year, or 1.4 servings per day, for every man, woman, and child."

He argued that each penny of tax on a 12-ounce drink would raise $1.5 billion annually and lower consumption roughly one percent, improving overall health. The Congressional Budget Office estimates that a three-cent tax would generate $24 billion over the next four years.

Such a tax might well be considered a "sin tax" similar to the taxes levied on cigarettes, which are extremely high compared to most other consumer products. Jacobson also wants the taxes on alcohol raised -- he argues that doing so will "compensate society for the costs of alcohol abuse and alcoholism and to marginally reduce problem drinking." The argument echoes the idea of cigarette taxes helping pay for health care costs associated with smoking.

In his testimony, Jacobson also called for a ban on artificial trans fat and a reduction in sodium levels in food.

Any soda tax a proposal is unlikely to pass easily, as New York Governor David Paterson well knows. Paterson's proposed 18-percent tax on soft drinks died amid pressure from the industry and resistance among New Yorkers who didn't want to pay more for soda.

It would also, it should be noted, only pay for a tiny portion of the health care overhaul.

Susan Neely of the American Beverage Association, which represents Coca-Cola Co., PepsiCo Inc. and others, told the Wall Street Journal that the tax would hit poor Americans hardest and would not lower consumption.

"Taxes are not going to teach our children how to have a healthy lifestyle," she said. Neely said the industry backs programs to lower consumption of sugary drinks in schools.