A New Tax on Soda Bubbles Up Across the Country
Policy + Politics

A New Tax on Soda Bubbles Up Across the Country


A suburban mother loads groceries into her car saying, “Washington is talking about a new tax on juice drinks and sodas. They say it's only pennies. Well, those pennies add up when you're trying to feed a family. Washington, are you listening? What doesn't seem like much to you can be a lot to us."

2009 was both a successful and expensive year for the beverage lobby, which was victorious in crushing federal proposals to impose a federal excise tax on sugary drinks as a means of paying for a health care overhaul package. 

This nationally televised ad is from The American Beverage Association, which represents Coca-Cola Co., PepsiCo Inc. and Dr Pepper Snapple. They spent at least $18 million on lobbying and millions more in campaign donations in 2009 in an effort to keep the government from becoming the nation’s food nanny. But 2010 may not be quite so sparkling for the beverage lobby, as budget-starved states and cities consider similar soda tax measures which might be trickier to derail.  And, as scientific data linking soft drink consumption to obesity and rising health care costs continues to surface, the prospect of hiking full-calorie soda taxes is becoming increasingly attractive for lawmakers scrounging for new revenue sources.

Spurred by Michelle Obama’s anti-obesity campaign, health care groups are starting to fire back, with controversial ad campaigns like this one from the New York City Department of Health depicting a man drinking a can of soda that morphs into fat.

Over the past decade, intake of calories from sugared beverages has increased by almost 30 percent and accounts for 10 to 15 percent of calories consumed by children and teenagers, according to a 2009 New England Journal of Medicine report.  For every 10 percent increase in soda prices, consumption decreases by 7.8 percent, according to a review conducted by Yale University’s Rudd Center for Food Policy and Obesity. And just last week, the University of North Carolina-Chapel Hill released its finding that an 18 percent tax on pizza and soda would change eating habits enough to cause the average American to lose five pounds.

American Beverage Association president Susan Neely disputes the research, calling the soda tax concept “a discriminatory, regressive tax that singles out a product and gives punitive treatment for those who cannot pay without meeting public health goals.”

Beverage taxes aren’t entirely new.  The bottle tax was imposed in 1971 in Oregon in an effort to recycle cans and bottles that were filling up landfills.  

This year so far, legislators in seven states and one major city have proposed revamping their systems for taxing high-calorie soft drinks.  New York, Kansas, California, Mississippi, Washington State, New Mexico and Philadelphia are all mulling an increase to currently minimal soft drink sales tax levels, or changing to an excise tax system where the increased soda price will appear in the grocery aisle as opposed to at the cash register.  In February, Colorado Gov. Bill Ritter signed into law a bill charging a 2.9 percent sales tax on candy and soda. Chicago already taxes sweetened soft drinks.

Taxing sugary, nondiet drinks provides “a golden opportunity to do one very good thing in New York State in an otherwise miserable budget year,” said New York State Department of Health Commissioner Richard F. Daines, an ardent supporter of imposing a penny-per-ounce excise tax on sugary sodas to make a $450 million dent in the $7.6 billion New York spends every year on obesity-related health costs.  

Some conservative, anti-tax groups continue to call foul on the state soda tax concept, calling it an unwarranted use of the tax code to control human behaviors. 

“Taxing soda is an egregious and ridiculous use of their power going after a narrow portion of the population to pay for fiscal mismanagement … It starts a slippery slope.  If we start taxing soda because it’s bad for our health, what’s next?” said Heritage Foundation Senior Tax Policy Analyst Curtis Dubay.  

But unlike many other taxation issues, soda tax support or opposition isn’t strictly split down party lines.  Kansas state senator John Vratil, a Republican, is the main voice pushing to implement a penny per teaspoon of sugar in sodas and sports drinks, and he says fellow Kansas Republicans tend to agree with him. Dr. Kelly Brownell, director of Yale University’s Rudd Center on Food Policy and Obesity, thinks the ABA may be in for a little heartburn.  “It’s just a matter of time until these taxes happen. Once one state does it, others will follow.”