||The examples and perspective in this article may not represent a worldwide view of the subject. (September 2012)|
|An aspect of fiscal policy|
It may focus on sugar-sweetened beverages (soda sweetened with sugar, corn syrup, or other caloric sweeteners and other carbonated and uncarbonated drinks, and sports and energy drinks). As an example of Pigovian taxation, it may aim to discourage unhealthy diets and offset the economic costs of obesity.
Obesity in the United States is a public concern with the percentage of overweight people being among the highest in the world. Soda consumption has been noted as a contributing factor to the obesity epidemic and medical costs related to obesity are about $147 billion a year. In 1994 the soda tax idea was introduced by Kelly D. Brownell, Director of the Rudd Center for Food Policy and Obesity at Yale. In 2009, 33 US states had a sales tax on soft drinks. France introduced a tax on soft drinks in 2012.
To counter the problem of children's easy access to soft drinks, in 2005 the American Beverage Association began working to remove soft drink machines from US primary schools (children aged six to fourteen), and to replace soft drinks with healthier beverages such as orange juice or milk. High schools would have a 50/50 balance of machines dispensing soft drinks and healthier alternatives. Although orange juice may have a few more calories than cola, it also has other nutrients and fiber.
In 2009 the American Heart Association reported that the soft drinks and sugar sweetened beverages are the largest contributor of added sugars in Americans’ diets. Added sugars are sugars and syrups added to foods during processing or preparation and sugars and syrups added at the table. Excessive intake of added sugars, as opposed to naturally occurring sugars, is implicated in the rise in obesity, and the AHA adds that no more than half of a person’s daily discretionary calorie allowance should come from added sugars.
A 2009 study in the Journal of Adolescent Health concluded that "It is likely that taxes would need to be raised substantially to detect significant associations between taxes and adolescent weight."
Taxing soda can lead to a reduction in overall consumption, according to a scientific study published in the Archives of Internal Medicine in March 2010. The study found that a 10 percent tax on soda led to a 7 percent reduction in calories from soft drinks. These researchers believe that an 18 percent tax on these foods could cut daily intake by 56 calories per person, resulting in a weight loss of 5 pounds (2 kg) per person per year. The study followed 5,115 young adults ages 18 to 30 from 1985 to 2006.
An April 2010 study published in the medical journal Health Affairs found that small taxes on soft drinks do little to lessen soft drink consumption or prevent childhood obesity, but larger taxes probably would. The study's author said that if taxes were about 18 cents on the dollar, they would make a significant difference in consumption.
Research from Duke University and the National University of Singapore released in December 2010 tested larger taxes and determined that a 20 percent and 40 percent taxes on sugar-sweetened beverages would largely not affect calorie intake because people switch to untaxed, but equally caloric, beverages. Kelly Brownell, a proponent of soda taxes, reacted by stating that “[t]he fact is that nobody has been able to see how people will really respond under these conditions.” Similarly, a 2010 study concluded that while people would drink less soda as a result of a soda tax, they would also compensate for this reduction by switching to other high-calorie beverages. In response to these arguments, the American Public Health Association released a statement in 2012 in which they argued that "Even if individuals switch to 100% juice or chocolate milk, this would be an improvement, as those beverages contribute some nutrients to the diet."
A 2011 study in the journal Preventive Medicine concluded that "a modest tax on sugar-sweetened beverages could both raise significant revenues and improve public health by reducing obesity". It has been used by the Rudd Center for Food Policy and Obesity at Yale to estimate revenue from a soda tax, depending on the state, year and tax rate.
A 2012 study by Y. Claire Wang, also in the journal Health Affairs, estimates that a penny per ounce tax on sugared beverages could prevent 2.4 million cases of diabetes per year, 8,000 strokes, and 26,000 premature deaths over 10 years.
In 2012, just before the city of Richmond began voting on a soda tax, a study was presented at a conference held by the American Public Health Association regarding the potential effects of such a tax in California. The study concluded that, given that soda's price elasticity is such that taxing it would reduce consumption by 10-20 percent, that this reduction "...is projected to reduce diabetes incidence by 2.9-5.6% and CHD by 0.6-1.2%."
A 2013 study in the American Journal of Agricultural Economics concluded that a 0.5-cent-per-ounce tax on soft drinks would reduce consumption, but "increase sodium and fat intakes as a result of product substitution," in line with the Duke University study mentioned above.
A study published on October 31, 2013 found that a 20% tax on sugar-sweetened beverages would reduce obesity rates in the United Kingdom by about 1.3%, and concluded that taxing sugar-sweetened beverages was "a promising population measure to target population obesity, particularly among younger adults."
Economics of the tax
The U.S. Department of Health & Human Services reports that the tax could generate $14.9 billion in the first year alone. The Congressional Budget Office (CBO) estimates that a 3-cent-per-ounce tax would generate over $24 billion over four years.
Some tax measures call for using the revenue collected to pay for relevant health needs: improving diet, increasing physical activity, obesity prevention, nutrition education, advancing healthcare reform, etc. Another area to which the revenue raised by a soda tax might go, as suggested by Mike Rayner of the United Kingdom, is to subsidize healthier foods like fruits and vegetables.
There have been a number of proposed taxes on sugary beverages, including:
- In 1914, U.S. President Woodrow Wilson proposed a special revenue tax on soft drinks, beer and patent medicine after the outbreak of World War I caused a decline in imports and a corresponding decline in credit created by import tariffs.
- In a 2009 "Perspective" piece in the New England Journal of Medicine, Kelly D. Brownell, PhD, Director of the Rudd Center for Food Policy and Obesity at Yale, and Thomas R. Frieden, MD, PhD, Director of the U.S. Centers for Disease Control and Prevention, argue for taxing sugared beverages. The authors propose that sugared beverages may be the single largest cause of the obesity epidemic. They state that an excise tax of one cent per ounce would reduce consumption by more than 10%.
- New York State budget proposals for 2009 included $0.01 per ounce tax on soft drinks, which was later abandoned.
- Washington State imposed a tax of $0.02 per 12 ounces on carbonated beverages from July 1, 2010 to December 1, 2010.
- Washington, D.C., and Colorado removed sugared beverages from the list of groceries that were exempt from sales taxes.
- Maryland and Virginia are two of 33 states that levy sales taxes on soda. Maryland taxes soda at a rate of 6%, while Virginia’s rate is 1.5%. Virginia is also one of six states that impose a state excise tax on soda in addition to a sales tax.
- In 2009, the Obama Administration explored levying an excise tax on sweetened beverages as part of health care reform efforts, but the proposal was abandoned after heavy lobbying by the beverage industry.
- In 2012, the City Council of Richmond, California placed the Soda tax on the November 2012 ballot along with an advisory measure asking voters how they would like to spend the tax revenue. This proposal was rejected by the voters, 67% NO 33% YES. If Richmond had passed the Soda Tax, it would have been the first city in the nation to do so.
- France is in the process of introducing a tax on sugary drinks for 2012; following introduction, soft drinks are estimated to be up to 3.5% more expensive.
- California state senator Bill Monning proposed a soda tax in 2013, however it died in committee on May 23, 2013.
- On June 25, 2013, the city of Telluride, Colorado proposed a penny-per-ounce soda tax; however, it was rejected in November, with 68% of voters voting against it.
- In July 2014, Rosa DeLauro, a Congressional representative from Connecticut, proposed a national soda tax bill in the House of Representatives.
- In November 2014, voters in San Francisco and Berkeley, California voted on soda tax ballot measures.
According to a Field Poll conducted in 2012, "Nearly 3 out of 5 California voters would support a special fee on soft drinks to fight childhood obesity." On the other hand, a 2013 poll concluded that "respondents were opposed to government taxes on sugary drinks and candy by a more than 2-to-1 margin." Support for a soda tax in New York was higher when pollsters say the money will go towards health care. A Quinnipiac University poll released in April 2010 found that New Yorkers opposed a state tax on soda of one penny per ounce by a 35-point margin, but opposition dropped to a margin of one point when respondents were told the money would go towards health care. A Thompson Reuters poll released in the same month found that 51 percent of Americans opposed a soda tax, while 33 percent supported one.
Fighting the creation of soft drink taxes, the American Beverage Association, the largest US trade organization for soft drink bottlers, has spent considerable money to lobby Congress. The Association's annual lobbying spending rose from about $391,000 to more than $690,000 from 2003 to 2008. And, in the 2010 election cycle, its lobbying grew to $8.67 million. These funds helped to pay for 25 lobbyists at seven different lobbying firms.
An industry group called “Americans Against Food Taxes,” backed by juice maker Welch's, soft drink maker PepsiCo Inc, the American Beverage Association, the Corn Refiners Association, McDonald's Corporation and Burger King Holdings Inc used national advertising and conducted lobbying to oppose these taxes. The group has characterized the soda tax as a regressive tax, which would unfairly burden the poor
Norway generalized sugar tax
Denmark instituted a soft drink tax in the 1930s (it amounted to 1.64 Danish krone per liter), but announced in 2013 that they were going to abolish it, with the goal of creating jobs and helping the economy.
In September 2013, Mexican president Enrique Peña Nieto, on his fiscal bill package, proposed a ten percent tax per liter, on all soft drinks, especially carbonated drinks, this with the purpose of reducing the number of patients with diabetes and other cardiovascular diseases in Mexico, which has the world's highest rate of obesity. According to Mexican government data, in 2011 the treatment for each patient with diabetes costed the Mexican public health care system, (the largest of Latin America), around $708 USD per year, with a total cost of $778' 427, 475 USD in 2010, and with each patient apporting only $30 MXN, (around $2.31 USD).
On September 2013, Mexican businessmen, together with companies of soft drinks and other food processing companies, such as FEMSA, launched a media campaign to discourage the Mexican Chamber of Deputies and Senate of approving the ten percent tax on sodas. They argued that such measure would not help reduce the obesity in Mexico and would leave jobless hundreds of Mexicans working in the Sugar cane industry, and also accused publicly New York City Mayor, Michael Bloomberg of orchestrating the controversial bill from overseas. On October 10, 2013, Forbes magazine ran an article on its website criticizing the bill and accusing the Peña administration of repeating the same mistakes of Mr. Bloomberg, and prognosticating that such measure would end in failure. That same month, Mexican Newspaper El Universal, published an article revealing that an international lobbying company, PwC, was charging a fee of $1000000 USD for each part of the fiscal package that was not approved, including the ten percent soda tax. In late October 2013, the Mexican Senate approved a $1 MXN per litre tax, (around 0.08 USD), on sodas along with a tax of 5% on junk-food.
On 21 March 2014, the Government of the island of St Helena, a British Overseas Territory in the South Atlantic, announced that it would be introducing an additional import duty of 75 pence per litre on sugar-sweetened carbonated drinks with more than 15 grams of sugar per litre. The measure was introduced on 22 May 2014, timed to coordinate with the schedule of the RMS St Helena and allowing time for importers to plan for the change.
The duty was introduced as part of a number of measures to tackle obesity on the island and the resulting high incidence of type 2 diabetes. Prior to the new duty, St Helena imported over 300,000 litres of carbonated sugar-sweetened drinks a year (equivalent to 200 cans for every resident of the island), with very few diet drinks being imported. Given these volumes, importers were able to negotiate large discounts meaning that, even where diet drinks were available, they are significantly more expensive than the full sugar equivalent. As a small, isolated island, it is thought that the tax can be applied effectively at the border with little opportunity for avoidance.
In the case of New York's 2010 effort to introduce a tax, measures to implement such a tax were supported by groups like the New York Academy of Medicine and editorial writers. The Alliance for a Healthier New York was formed with financial and strategic support from the United Healthcare Workers East union and the Greater New York Hospital Association. Groups such as New Yorkers Against Unfair Taxes, set up by beverage companies, grocers, teamsters who represent drivers and production workers and others, lobbied against the measure. The anti-tax forces argued that the tax was based on dubious science, because obesity was a matter of how many calories people consumed, not where those calories came from.
The idea that the soda tax would cut into the income of poor New Yorkers while doing nothing to improve their access to exercise or healthful food was echoed by some advocacy groups for the poor. For example, Triada Stampas, the director of government relations for the Food Bank of New York City, testified against the tax before a Senate committee.
PepsiCo’s world headquarters is in Purchase, N.Y., and lawmakers in the Westchester County area and in districts with bottling companies of all kinds quickly lined up against the tax. The economic argument swayed even with some Democrats who otherwise tend to favor taxation.
Estimates of the amount spent by the Alliance for a Healthier New York, in support of the tax, range from $2.5 to $5 million. The American Beverage Association spent $9.4 million in only the first four months of 2010 to oppose New York’s soda tax, according to a search of public lobbying records by the New York State Healthy Eating and Physical Activity Alliance. Most of the money was spent on advertising, media, and strategy.
Some opponents suggested New Yorkers would try to evade the tax by buying soda on Native American reservations, where some smokers go to find tax-free cigarettes, or by crossing the border to New Jersey, harming New York retailers.
Richard F. Daines, the New York State health commissioner has argued that such a tax would be good for society, especially children and teenagers. He often equated the campaign against sugary drinks to the campaign against tobacco.
The Measure D soda tax was approved by 75%  of Berkeley voters on 4 November 2014, and took effect on January 1, 2015 as the first such tax in the United States. The measure imposes a tax of one cent per ounce on the distributors of specified sugar-sweetened beverages such as soda, sports drinks, energy drinks, and sweetened ice teas but excluding milk-based beverages, meal replacement diet drinks, fruit juice, and alcohol. The revenue generated will enter the general fund of the City of Berkeley. A similar measure in neighboring San Francisco received 54% of the vote, but fell short of the supermajority required to pass. In August 2015, researchers found that average prices for beverages covered under the law rose by less than half of the tax amount. For Coke and Pepsi, 22 percent of the tax was passed on to consumers, with the balance paid by vendors.UC Berkeley researchers found a higher pass-through rate for the tax: 47% of the tax was passed-through to higher prices of sugar-sweetened beverages overall with 69% being passed-through to higher soda prices.
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