Pro-tax: Existing state soda taxes

Opponents of a soda tax often argue that dozens of states already have taxes on soda, and none of them have effectively reduced obesity. In particular, some have cited that Mississippi, the most obese state in the Union (at 32.8 percent of the population), has a tax on soda; therefore, they say, the soda tax must be ineffective.

Indeed, these state soda taxes have had little effect on obesity rates. Fortunately these state taxes have, at the very least, raised more than a billion dollars a year. However, as the Center for Science in the Public Interest (CSPI) states, "Unfortunately, existing state taxes are too small to significantly reduce consumption and almost none of the revenues are earmarked for health promotion." I have emphasized these points in earlier blog posts: the tax must be significant enough to reduce consumption, and the revenues are best used promoting health and preventing obesity, particularly with children.

As I mentioned in an early blog post, an article in the New England Journal of Medicine stated that a penny-per-ounce tax could reduce consumption of sugary beverages by more than 10 percent. Assuming that an average 12-ounce can of soda costs 60 cents, and that my math is right, this means about a 20 percent tax on soda. But according to my analysis of this data for state soda taxes in 2008, the average tax rate for soda sold in vending machines was 3.981, and the average tax rate for soda sold elsewhere (e.g., convenience stores and grocery stores) was 3.319. The 2008 highest tax rate for vending machine soda was 8 percent; the highest tax rate for non–vending machine soda was 7 percent. (Feel free to comment if you have questions about my calculations.) These are less than half of the recommended 20 percent; therefore it is no surprise that these taxes have had little effect on the consumption of soda and on obesity rates. In this case, the tax must be significant to have any effect on consumption.

I recommend checking out CSPI's Liquid Candy website. I found information for this blog post there, and it has a great compilation of resources related to the soda tax issue. Also, this is where I got the picture for this post. Enjoy!

Pro-tax: Soda taxes then and now

And now for a brief, nostalgic look into the past and present of the soda tax...

1776 | Adam Smith, in his landmark Wealth of Nations, states:

Sugar, rum, and tobacco are commodities which are nowhere necessities of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation. [An Inquiry into the Nature of Causes of the Wealth of Nations (1776); New York: E. P. Dutton & Co., 1910; available on Google Books.]

July 2009 | President Obama tells Men’s Health magazine that taxing soda is “an idea that we should be exploring.” This quote is taken from pages 7–8 of the article:

Would the president consider so-called sin taxes, on soda and other sugar-laden products, or on activities that sabotage the health of the masses? (When I suggest this, I’m picturing tollbooths on every point of access to Vegas.)

“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.”

Not bad when the father of modern economics supports your cause.