Better Health Through Soda Pop Tax

biggulpWhether you call it pop, soda, a soft drink or lower-case coke, sugary, carbonated beverages have become a staple of the American diet. And as we all know, the American diet is not exactly the healthiest. So with obesity racking up an estimated $150 billion a year in health care costs – which, as you may have heard, is in the news lately – some researchers have considered whether Coke, Pepsi and their sucrose-packed brethren should be subject so the same type of “sin tax” that has been applied in the past to alcohol and tobacco by some governments.

Here in ScienceLife’s home state of Illinois, carbonated soft drinks (as well as most candy) were recently reclassified from being considered as food to “general merchandise” – a seemingly innocuous change that actually means a sales tax increase from 2.25 percent to 10.25 percent in Chicago. In Illinois, the switch was justified as a way to generate much-needed revenue for state services, but could it also have a direct public health benefit by discouraging people, particularly children and teenagers, from drinking hundreds of calories in soda pop each day?

In this week’s New England Journal of Medicine, seven public health experts assess the best methods of improving public health through taxation of soft drinks. Soda is already taxed in 33 states, according to the article, at an average of 5.2%. But research indicates that those taxes have only marginal effects on soda consumption and obesity. One recent study out of UIC found only “weakly significant” effects of tax rate on the body mass index of children “at risk” of being overweight. In NEJM, the authors immediately state that the current tax rates are too small to have an effect on consumption – after all, a 5% tax on a 75-cent can of Coke is less than 4 cents, hardly enough to get someone to switch to water.

But the authors go on to suggest different methods of taxation that could be more effective in motivating people to change their beverage behavior. Rather than imposing an increased sales tax on all soda purchases, the authors suggest a tax of 1 cent per ounce on beverages with “added caloric sweetener” – your standard sugary Coke or Pepsi, but not your Nutrasweet-infused Diet versions. So a 12 oz. can of soda would set you back 12 cents, and a convenience-store fountain drink behemoth would cost almost a dollar extra, but if you opt for the diet version, no tax. Thus, the authors hope the tax will encourage (or financially push) consumers to make healthier decisions rather than merely opting for cheaper sugary drinks.

This would, of course, generate a lot of money for governments that are currently thirsty for revenue. The per-ounce tax that the authors suggest would generate an estimated $14.9 billion in the first year, according to the article. Rather than providing the funds for a new surge of pork-barrel projects, the authors suggest that the bulk of the money be reinvested in childhood nutrition and obesity prevention programs, doubling down on the public health benefit of the new taxation policy.

Of course, there is a tinge of fantasy to this soda tax plan that may prevent it from being implemented in the recommended form. As you might guess, putting a tax on soft drinks doesn’t exactly play well with the soft drink industry, a backlash that the NEJM article addresses. Earlier this year, New York governor David Paterson proposed a 18% sales tax on soda and some fruit drinks. In response, PepsiCo threatened to move its headquarters – and 1,000 jobs – out of the state. It’s not expected to be particularly popular with the people who buy and drink pop on a regular basis either. Though the NEJM article cites (without a reference) a New York state poll where 52% of residents support a soda tax, other polls taken after Paterson’s announcement found support as low as 33%.

The other important question: even if you managed to overcome corporate lobbyists and public opinion in order to pass a soda tax, would it work? The “sin tax” on cigarettes has increased substantially over the last 15 years, from an average of 57 cents in 1995 to $2.21 in 2009. But as mentioned in the very interesting New York Times magazine article on social contagions published this past weekend, the American smoking rate has leveled off at about 20% over the past decade. That data suggests that there’s a certain population of smokers invulnerable to price changes (and dire health warnings) out of addiction or sheer stubbornness. Many more people drink soda than smoke cigarettes, and surely some people will reduce their consumption or switch to water due to higher prices, but what about those who won’t, or can’t? 

There was some noise about a federal tax on soda showing up in the health care reform bills currently percolating through Congress, but the bill released by Sen. Max Baucus yesterday had no such thing. So Coca-Cola and Pepsi executives – and loyal devotees of their products – can breathe a sigh of relief, for now. But in a climate where more people are starting to realize the importance of cutting health care costs up front (meaning preventive care and healthier habits), it’s probably not a topic that’s going away any time soon.

Just keep your government hands off my coffee.

About Rob Mitchum (526 Articles)

Rob Mitchum is communications manager at the Computation Institute, a joint initiative between The University of Chicago and Argonne National Laboratory.

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