A Bloomberg editorial published this week urged the expansion of soda excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. es to help combat obesity. The piece argues that sugar-sweetened beverage taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es around the world “are steering people away from the most dangerous of empty calories,” and that “governments everywhere should tax sugar to persuade people to cut back.”
With obesity being a major driver of preventable disease incidence and health-care expenditure in the United States, obesity prevention is certainly a laudable goal. However, the fact that excessive sugar intake can contribute to obesity does not make soda excise taxes a sensible policy solution. Excise taxes are both too narrow and too blunt an instrument to address such a complex, multifaceted public health issue.
Proponents of soda taxA soda tax is an excise tax on sugary drinks. Most soda taxes apply a flat rate per ounce of a sugar-sweetened beverage. increases frequently note that tax hikes do usually lead to soda consumption decreases, but of course, this is just in accordance with the law of demand (when prices rise, quantity demanded falls). However, it is erroneous to infer that healthier consumer decisions and lower rates of obesity are the natural results of reduced soda consumption because of higher soda taxes. In fact, many studies suggest otherwise.
National Health and Nutrition Examination Survey data indicates that when individuals reduce soda consumption due to soda tax increases, they fully offset the calories they would have consumed from soda with calories consumed elsewhere, rendering soda taxes ineffective in terms of caloric reduction.
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A 2012 study by Cornell University found that, when faced with a new soda tax, many households reduced their soda consumption while purchasing an increased amount of beer, substituting one “vice” for another. Another study concluded that the impact of soft drink taxes on body mass index (BMI) is minimal and not statistically significant.
In acknowledging the limits of soda taxes, the editorial suggests going even further by extending excise taxes more broadly to foods with “added” sugar. Many Americans would understandably bristle at a new imposition of special taxes on cereal and salad dressing, protein bars and vitamin water, yogurt and ketchup, and canned fruits and vegetables. The unintended consequences of a tax like this would be boundless—the imposition of a punitive tax on salad dressing, for example, would discourage purchase of salad dressing because of its sugar content while paying no heed to its status as a key ingredient in salads, otherwise regarded as a healthy dietary option.
If “taxes on sugar won’t solve the world’s obesity problem,” as acknowledged in the editorial, then where do we stop? If a special tax is imposed on foods with added sugar, should saturated fats and processed foods be let off the hook? And since unhealthy dietary habits are but one of many factors contributing to obesity, ought we to impose tax penalties on missed workouts or time spent watching TV? Perhaps we could do annual weigh-ins (they do waist measurements in Japan!), and calculate an income tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. program for those that meet the expertly-determined ideal number.
Rather than manipulating tax codes to influence behavior, a better solution would be to address public health issues directly and comprehensively—through evidenced-based public education and awareness—while leaving the tax code to do what it is designed to do: generate a stable and transparent source of revenue to fund government services.Share