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NYC Ban on Large Sodas Plagued by Same Problems as Soda Excise Taxes

2 min readBy: Will Freeland

On Thursday the New York City Board of Health approved the ban of sodas and large sugary beverages over 16 ounces originally proposed by Mayor Michael Bloomberg. The ban is part of a nationwide trend of government on all levels considering new taxes and bans on soda, sugary beverages, and candy in order to fight what many have called an “obesity epidemic.” As my colleague, Scott Drenkard, pointed out last October in his study “Overreaching on Obesity: Governments Consider New Taxes on Soda and Candy,” sin 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 designed to fight obesity have major shortcomings. From the key findings of that study:

  • 17 states tax candy at a higher rate than other groceries, and four states collect an 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. on soda.
  • In 2011, 14 states proposed new soda taxes (in some cases, raising product prices by as much as 264 percent). Two states proposed new candy taxes.
  • Between 1998 and 2010, soda consumption per capita fell by 16 percent.
  • Soda and candy taxes do not necessarily decrease caloric intake. One recent study finds that when adolescents switch away from soda due to price increases, the drop in calories is offset by an increase in calories consumed in other food and drink.
  • Definitional problems plague the enforcement of and compliance with special taxes on candy and soda. For example, under many tax laws, a product with flour would be treated as food while a similar product without flour would be considered candy.
  • Excise taxes on candy and soda fall on all individuals who consume the products, even those who do so moderately.

The New York City ban on sodas above 16 ounces is plagued by many of these same short-comings. Drinks with similar or greater caloric values like milkshakes, alcohol, and juice are all exempted. Moreover, the ban does not involve any type of food. Customers will likely shift their consumption behavior to avoid the ban without altering their caloric intake substantially.

Additionally, the ban is an overly broad “shotgun” approach that affects all consumers, not just those at risk of obesity. Those who live a healthy and disciplined lifestyle style face government intrusion in their consumer decisions if they want indulge in an occasional soda. As Scott Drenkard noted in the before mentioned study:

Proponents of obesity taxation argue that they are helping to internalize externalities, yet what they really do is unfairly burden all who enjoy soda and candy, regardless of what might be otherwise very healthy lifestyle habits.

Perhaps most importantly, Drenkard’s key conclusion regarding soda and candy taxes also rings true for this soda ban:

The solution to the obesity problem will not come from abdicating personal decisions like eating choices to government. It will come from consumers making prudent decisions about their own diets, exercise and health needs.

New York City’s ban represents a step in the wrong direction for public health and sound tax policy. Mayor Bloomberg and the New York City’s Board of Health should reexamine their approach to obesity.