“Calorie Offsets” Instead of Soda Tax

Taxing soda pop, which seemed like a crazy idea just 12 months ago, is gaining traction with academics and politicians.

Recently, President Obama said a soda tax is “an idea that we should be exploring.” And in a research paper published yesterday by the New England Journal of Medicine (NEJM), a team of 7 scientists recommend taxing every fluid ounce of sugary soft drink by one penny. Those pennies add up to $15 billion annually that the federal government can spend on consumer education and healthcare.

The recommendations are based on research that shows:

1. consumption of sugary drinks has directly contributed to obesity in the US.

2. raising the price of soft drinks will reduce its consumption.

Of course the beverage industry is all over this, and in it multimillion dollar campaign, including a website nofoodtaxes.com, states:

Discriminatory and punitive taxes on soda and juice drinks do not teach our children to have a healthy lifestyle and have no meaningful impact on child obesity or public health. They just further burden working families already struggling in this trying economy.

Muhtar Kent, CEO of the Coca Cola Company calls a soda tax “outrageous” and likens the very thought of it to a communist conspiracy:

“I have never seen it work where a government tells people what to eat and what to drink. It if worked, the Soviet Union would still be around.”

Mr Kent is right, the government shouldn’t decide for consumers what to eat or drink.

But it should protect consumers from unscrupulous corporations who are literally shoving junk food and drinks down our throats. Everywhere we turn, soft drink machines, snack dispensers, candies, chocolate bars, more soda, more snacks. Not to mention the endless commercials, advertisements, and other branding brainwashing activities all aimed to increase our consumption and their profit.

However, as we have suggested in the past, taxing the consumer is not the way to go.

What the government should do is to tax these corporations, big time. This, through mechanisms similar to carbon offsets in the industrial sector. Let’s call these calorie offsets for now.

Here’s how calorie offsets would work:

for every ton of added sweetener (sugar or corn syrup), a company would contribute $3000 to government programs aimed at obesity reduction. Three thousand dollars is equivalent to the penny per ounce tax suggested by the NEJM.

This suggestion will likely infuriate Mr. Kent and his friends at the ABA even more than taxing consumers. So what. Coca Cola and PepsiCo are among the most profitable companies in the food industry. The Coca Cola company, worth $120 Billion, had a net profit of $6 billion last year on sales of $30 billion. Not bad for a company that sells water and fizz mixed with high fructose corn syrup and artificial colors.

What are the advantages of Calorie Offsets?

1. They reduce the profitability of sugary drinks and encourage manufacturers to shift to healthier products.

2. If a company chooses to raise prices of soft drinks to maintain margins, that’s perfectly fine. Market forces will work for the benefit of the consumer. Shoppers will now revolt against said company by buying from its competitor. The government won’t be the scapegoat. We’ll see then who’s accused of discriminatory and punitive taxes.

3. The offset money will be marked and used, of course, to undo the the damage to the public health and to educate the public.

To summarize, as their customers are getting fatter and sicker, beverage industry shareholders are getting richer and richer. The government should require these companies to directly foot the bill for the damage that they are causing to the public.

What to do at the supermarket:

A suggestion for those of you concerned about a potential soda tax – A family of 4 can save $500 a year just by switching from soft drinks to tap water.

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  • http://www.newtaste.com Dave Schy

    While I agree with you that something needs to change, I just don’t think that the American people are open to one more new idea at the moment, especially if can be framed by the opposition as costing them more money.
    Here is what I have been thinking….The ratio of added sugar to total volume of liquid in any recipe can be measured and stated as a percentage or number called “brix”, much like the formula to determine the proof in alcohol. The proof number is used to regulate and tax alcohol.
    I think that we can apply this same thinking and legal precedent to convince people that we should identify the percentage of added sugar in products and slap that number on the can/bottle/cup/menu board for all to see. We then could cap that “sugar proof” number at the level it is today. Next we slowly lower that number, the percentage of added sugar, over a period of time allowing the whole country to wean itself from the super sweet levels we are at today.

  • http://www.betterschoolfood.org Dr. Susan Rubin

    Hey Dave,
    your approach would be a benefit for the owners of products like Vitamin Water which has less sugar than Coke. Perhaps that’s why Coca Cola purchased the company that makes Vitamin Water for $4 billion dollars, they knew this day was coming!

    The parallels between the food industry and the tobacco industry are so similar it’s frightening. These manufacturers are all too aware that sugar, caffeine and artificial sweeteners are addicting!

    I’d like to see all this purveyors of junk food and drink pay for the damage they have done to Americans. Whether its a calorie/ chemical tax on corporations or a tax on the beverages themselves. Don’t forget diet sodas and drinks….it’s not just the calories, it’s the hazardous ingredients!

  • http://www.logicane.com Tim Davies

    What about a low GI cane sugar which actually contains documented beneficial nutrients? Should we be distinguishing between types of sugar and the impact they have on blood sugar or obesity? I like the calorie offset concept though!

  • Derek

    I disagree that taxing the corporations is the way to go. People should take responsibility for their personal health choices, just as we do with alcohol and tobacco. Food should be taxed based on it’s nutritional value and sodas should not be singled out. Someone much smarter than me should come up with a reasonable formula, and by “someone” I’m not talking about the corrupt politicians we lovingly refer to as Congress. Personally, I like the idea that healthy food could become cheaper than junk food.

  • Michelle Schulp

    I know this is an extremely old post, but…
    Taxing a corporation is no different than taxing a consumer. More costs for the organization = more costs to pass on to the consumer. Companies do not pay taxes, the buyers of their products pay the taxes. And you’re also not talking about profit MARGINS here when you speak of profits (what is the profit relative to the cost of making, packaging, researching, shipping, etc., or to put simply, what is the percent per unit sold that results in profit after costs?) It could very well be high, I don’t know. But that’s the more accurate number to use.

    I’m not saying pop/soda is a good thing, nor am I saying that the companies are not at fault. Just don’t use faulty arguments when discussing money and taxation.