A handful of cash-strapped states have been eyeing your Big Gulp as a new tax revenue elixir. Can a nationwide soda tax be far off?
The obesity epidemic has reached crisis levels. More than one-third of U.S. adults are obese, with obesity-related conditions, such as heart disease, stroke, Type 2 diabetes, and certain types of cancer, emerging as some of the leading causes of preventable death.
These preventable, chronic conditions have overloaded the American health care system, with costs related to obesity now estimated at between $147 billion and $210 billion per year. With the stakes this high, uncovering the lifestyle links to these issues and attempting to curb their impact is a major challenge for public health officials.
Enter the soda tax.
The American Heart Association lists soft drinks and sugar-sweetened beverages as the largest contributors of added sugars to Americans' diets. Increasingly, government officials around the country are looking at taxing these beverages to create a disincentive to consumption, and, ultimately, to generate revenue to offset the higher health care costs that come along with obesity.
As of January 2014, 34 states (plus Washington, D.C.) apply a small sales tax to sugar-sweetened soda sold in stores, and 39 states and D.C. apply tax to sugary soda sold in vending machines. In the fall of 2014, Berkeley, California became the first city in the U.S. to pass a larger tax on sugar-sweetened beverages, where these drinks are now subject to a one-cent-per-ounce tax.
And it's not just the United States that is getting into the game. Last year, Mexico--which is the only country with an obesity rate higher than the U.S.--put a nationwide, one-peso-per-liter tax on sugary drinks, which raised their price of these drinks by roughly 10 percent. As a result, sales on sugar-sweetened beverages dropped about six percent over the course of one year.
I recently spoke with Kelly Brownell, who is the dean of Duke University's Sanford School of Public Policy, and is a leading authority on public policies to enhance nutrition and combat obesity. He told me that, thanks in large part to the successful case studies in Berkeley and Mexico, momentum is building, and there is certainly potential for a national soda tax in the U.S.
"Estimates are that a tax of 20 percent will result in 15-to-20 percent reduction in consumption, which would be one step forward in a number of things that must be done to address obesity," Brownell says.
That certainly sounds like it would put a significant dent in the obesity problem, while raising much-needed funds to boot. But we all remember what happened when New York City enacted their large container ban on sugar substances. Without rehashing the gory details, let's just call it a failure. But Brownell says that failure shouldn't be held against the idea of a soda tax.
"There were several unfortunate circumstances that made it an uphill battle for New York City," he says. "Unfortunately, because of state law, the city has jurisdiction in a small number of venues, like movie theaters, restaurants, and food carts. The law was considered arbitrary by the courts in part because container size might be restricted in a movie theater but not in the convenience store next door."
The good news, Brownell says, is that there is tremendous momentum building. France, Mexico, Romania, and others have similar taxes. And Brownell himself admits that he was surprised by the significant impact the tax in Mexico had, considering its relatively low, 10 percent threshold. What kind of impact could, say, a 20 percent tax in the U.S. have?
"When I was at Yale, we developed Rudd Center Tax Calculator that can show the revenue potential for any area," Brownell explains. "For example, for California alone, the income for the state would be a billion dollars a year."
So what stands in the way of a soda tax? As you might imagine, soda companies, which are highly invested in keeping this fight at bay. Coca-Cola's recent ad campaign to define an "energy balance" is just the latest in the big-dollar investment by soda companies to try to get consumers to rethink giving up their cans and bottles of carbonated calories.
"The beverage industry has said these taxes won't slow consumption, but they have spent tens of millions of dollars to fight the tax from becoming law," Brownell says.
Are we on the precipice of a nationwide soda tax? It's hard to say, but it certainly seems like lawmakers can find lots of reasons why it makes sense to explore it further.