The Sugar Tax is Coming

Soda Tax

Last week, Congresswoman Rosa DeLauro (D-CT) introduced the SWEET ACT to the House of Representatives. The formal name: Sugar-Sweetened Beverages Tax Act of 2014. The gist of this proposed law, is a federal excise tax on specific types of sugary drinks.

More specifically, the tax will be 1 cent per teaspoon of added sugars in beverages such as soft drinks, sports drinks, energy drinks, and sweetened teas. A 12 ounce can of Coke, with 39 grams of sugar (about 9 teaspoons) would be taxed at 9 cents. A 12-pack will add $1.08 to the current $6.50 price, a 16% price increase. The tax is estimated to bring in $10 billion dollars worth of revenue that (hopefully) the government will spend on smart and effective programs to reduce obesity and diabetes.

The beverage industry is livid, stating that “taxes don’t make people healthy”. While that’s true, soft drinks do make people unhealthy, and account for over one third of the added sugars we consume every day. So if you want a simple tax on foods with added sugars, it makes sense to start with soft drinks as a category.

That said, is tax the best way to solve the problem?

From an economic perspective, higher prices will decrease consumption, that’s obvious. This has worked well with cigarettes. However, is a 16% price increase high enough to discourage soda lovers?

Furthermore, manufacturers will not see a per-unit decrease in revenue. Maybe a better solution is to tax manufacturers on their inputs. They would then have the option to raise prices, or, due to competitive pressures, leave prices as they are and slightly reduce their obscene profit margins. A side benefit may be a slightly lower number of soda commercials on TV.

However, an even better solution would be to end the silly subsidies for corn, which is the number one ingredient used in soft drink. Corn is so cheap that huge surpluses started piling up, and that’s when scientists invented a process to turn corn into high fructose corn syrup. The rest, as they say, is obesity history.

What is clear so far, is that “personal responsibility” and “freedom of choice” are nice ideals, but when it comes to actual consumer decision making, people ARE influenced by prices and ARE influenced by advertising. Increasing pricing and reducing ad exposure will decrease consumption, more than “education” ever will.

What do you think?

  • Ozzyopolis

    A tax won’t completely solve the problem. Look at cigarettes. The tax didn’t put a dent in it; PSAs, education, and changing the culture around it did (no smoking in govt buildings, universities, restaurants, and even bars now). It’s no longer ‘cool’ to smoke. Also, most people seem to finally understand the dire health consequences.

    • Type24U

      Ozzy, do some homework. Taxes on cigs funded the education and decline in smoking.

      No, it will not “completely” solve the problem. However, it will address the problem, and likely have an impact. There is, however the issue, as Colleen notes, that people will switch to diet beverages, which have different, perhaps even worse, health hazards.

      • camp

        I think the tax money should be used towards healthcare, not just prevention. Those who greatly contribute to rising healthcare costs should pay for it.

      • Ozzyopolis

        You’re right. I misstyped and wasn’t clear what I meant. What I didn’t convey properly is that a tax doesn’t immediately stop people from buying cigarettes. They just groan and pay more and keep smoking. Yes, over time with the tax funds going toward the education it will clearly help.

        • Type24U

          Ahh … I agree. Cigs are a bit different since they are highly addictive. Current smokers are not likely to quit, but as you note — groan and fork over the cash.

          One of the real problems with soda is that it is cheaper than milk. So, a parent on a tight budget can buy a big ol’ bottle of soda for less than they healthier alternative.

    • Spaceechik

      There is also the fact that while you can put down cigarettes and never pick them up to stay alive, you will have to eat every day of your life to survive. Opening the refrigerator door will be a struggle every day, to reach for the right food. Ask any dieter. Not buying bad food removes temptation at home, but then you have to go to work or to school in the morning. What do you do then?

  • Colleen Thomas

    While this is a great first step, what about “diet” beverages full of artificial sweeteners? Those are being proven yo br just as bad.

    • timlockk

      This is a good point. We will probably start seeing more people choose 0 calorie sweeteners as a result, and then have to deal with a host of other medical issues down the road.

      Still, I support anything that will make people stop and think about their food choices, as that opens the door for positive change. I hope this tax will succeed in that.

  • Son of Liberty

    How about GOVERNMENT STOP trying to manipulate CITIZENS of these UNITED STATES OF AMERICA through rediculous social management policies?

    • Michael

      Or, how about the healthy drink beverage companies creating beverages that taste great and aren’t 5-10 times the price? Perhaps a better solution is for the government to give those companies a break instead of penalizing the soft drink manufacturers. Positive reinforcement is proven to be a better motivator.

      • Michael

        Of course, any intelligent human being can figure out that these taxes have nothing to do with health and everything to do with capitalizing on the habits of the population. The motivator is the same as for some of the companies: greed. Only government greed is worse because it has the power of the state backing it.

    • mfp142

      Son of Liberty: Although I agree with you in spirit, this obesity and health issue has reached such a proportion as to cause a national security issue. I personally know several young men who were turned down for military service due to health problems from being overweight, diabetic, etc. Someone’s gotta bring people to their senses. I dont know if this tax is the answer, but its certainly gotten the conversation started :0)

      • jadegreen_eyz

        mfp142, I suspect it wasn’t sugar alone that made those men fat/ill, they probably also consumed high fat foods. There is a correlation between the two. That they lacked the discipline to maintain a healthy body weight would clearly reflect an inability to withstand the physical demands and rigors of military life. And I know of what I speak, I am a VN era USMC vet. I weigh the same today as the day I entered boot camp. Also, if you follow current events, you are probably aware that our government is currently handing out pink slips to our military serving in Afghanistan.

        • mfp142

          So true. I see so many young people gorging fast “food”. Of course the belly buster soda comes with that BigMac and large fry so you’ve got the preservatives fat salt and sugar combo! My grandpa was USMC, first battalion on Guadalcanal, and even in his Older years could’ve outdone many of todays youth…..

          • jadegreen_eyz

            I bet your grandpa could also (it’s a matter of Marine Corps pride :D ). What bothers me about this entire sugar issue is what I had mentioned above – consuming excess sugar and high-fat meals (i.e., fast-food); also, a lack of exercise and the lack of personal accountability are factors. One can’t point the finger solely at sugar. Obesity is becoming a world-wide epidemic. Presently, 27.7% of Americans and 70% of Saudis are obese. In the UK, 67% of men and 57% of women are either overweight or obese. I just don’t believe taxing (our government never met a tax it didn’t like) certain sugar-sweetened beverages is going to incentivize obese individuals to modify their dietary habits and this tax also strikes me as hypocritical as there are members of Congress suffering from obesity ( I wonder how they will vote). We are starting down a slippery slope. Next, we will be hit with a snack food tax – when will it end?

    • Type24U

      Son, I agree with your premise. However, already in place are government subsidies that make soda sweetened with corn syrup very inexpensive. Eliminating government manipulation of corn prices would have the exact same effect as a tax — make the sugary drink more expensive. It’s really hard to change the subsidies — too many interests to fight. A tax is an imperfect solution, but I think justified based on the health crisis that sodas are contributing to.

      You also have the matter of food companies being able to effectively market very unhealthy products. It’s protected speech. A tax helps level the playing field.

  • bpie1

    I think people who purchase healthy food should get some sort of tax break because its so damn expensive to be healthy. As a consumer I do go to the extremes when it comes to ingredients, I do not mess around. I shop for the best quality of food for my family and that means I dont just go to one store. Its rediculous at how much time I put in my shopping trip to be healthy. I d like compensation of some sort, its draining in more ways than one!

    • lauren

      I agree! If they are going to tax sugar, there should be a tax break for healthy foods. This way, people are even more likely to stop buying unhealthy foods/drinks ( although in my opinion who cares let people eat/drink whatever they want its none of anybody else’s business.

    • mfp142

      Bpie1: If I could, I would give your comment a million upvotes!

    • Spaceechick

      And who will be allowed to determine what ‘healthy’ is? The corporations are already pushing the meaning of organic to ridiculous extremes by constant redefinitions of the term. It’s going to be chaos just to set down the rules for a tax break on ‘healthy’. Pop tarts, anyone?

  • lauren

    Politicians know nothing about microeconmics. The tax burden will fall mostly, if not completely, onto the producer. Therefore, consumers will likely be paying the same or close to the same price, and the tax will be ineffective. Not to mention, who cares if people drink soda/sweetened tea/etc???? I sure dont. If someone wants to drink themselves to death with sugary drinks then let them. Its no one elses business whatsoever.

    • mfp142

      Until the taxpayers have to foot the bill for soda drinkers’ healthcare. And insurance companies continue to raise rates due to the massive cost of obesity and all the health problems that over indulgence causes. Then it definitely is a major concern for everyone!

    • Type24U

      What??? Coke and Pepsi will just absorb the cost and consumers will pay the same? Hardly.

      Oh, and while you may not give a hoot about your fellow man’s diabetes, I’m surprised that you also don’t care about the future cost of your (that’s you, “your”) health insurance costs as the country spends more and more to treat those miscreant soda-swillers. Your lack of care/compassion will cost you a few payments on your BMW.

  • Rodney Long

    Won’t work. I don’t think a few cents is going to stop anyone who wants a soda.

  • mfp142

    Bottom line, soda is poison. Stop making it altogether! Watch teeth and bones get stronger, weight is lost, kids get their attention span back, grades go up, mom and dad feel better and have more energy, people on food stamps buying soda now have to opt for healthier drinks…I mean, the benefits are freakin endless!! And many of the debates currently being bickered over suddenly disappear!

  • james

    Real sugar does not make people fat, what makes people fat is eating food devoid of nutrients due to the manufacturing process as well as the use of pesticides, fungicides, GMO’s etc. When a food is full of pesticides for example the body packs the pesticides around the body as fat, as the body is not made to process pesticides as a food source. When we detox with raw green food or clays the pesticides etc bind to the food and then the liver is able to eliminate the pesticides for example. Let us also not forget the fact that most people have parasites and parasites crave sugar, eliminate the parasite eliminate the craving! Wake up people we do not need anymore taxes or laws, we need better education and natural organic unadulterated non GMO, non- nanoparticle food! If we continue down this road of taxing and creating laws around food we are doomed to failure.

    Education about real food and real health and the personal responsibilities associated with the care and health of the body is the answer for us all. We must take responsibility for our health and wellbeing

  • bpie1

    Here’s an idea. Stop making fake foods. Stop GMOs, stop cancer causing “preservatives” stop adding un-necessary sugars, fats, and salts! Make foods / drinks that allows our bodies to process efficiently. Just about everyone is in toxic overload and the body simply cant handle all the damage this brings on a constant basis! Heres a brief story I once told my dad who was highly addicted to diet cokes. I told him to go to the grocery and dont buy anything just simply observe. Observe what other people have in their carts and then look at them. Then ask yourself, is all that processed nasty “lowfat” “diet” “lite” “fat free” “low calorie” stuff really working for them?! He went and observes and has not had a diet coke in over 3 years and he feels so much better just eliminating diet cokes. Just imagine eliminating everything all together. Its tough I know, but my health is way important to me.

  • bpie1

    I always say, the longer the shelf life, the shorter the human life. Look at mcdonalds hamburger and fries video on YouTube! Yuck!

  • eMatters2

    Good idea on eliminating subsidies. Bad idea on the sugar consumption tax. It will also have the unintended consequence of steering people to artificial sweeteners, which are ultimately worse for most people.

  • Guest

    How about we just send obese people to Africa, so healthy people don’t have to be screwed over by them or look at them

  • Traci

    People should decide for themselves what they will put in their bodies. We live in an informed era when it comes to proper nutrition, i.e. fooducate. You cannot compel people, by legislation, into making better choices.

    Government should only interfere when an ingredient is poisonous…..not just fattening.

  • Steph

    This would be pretty irritating. I don’t but soda, but as I am a triathlete/marathoner, gatorade and powerade certainly have a place in my life. As does chocolate milk ;)

    Also, this doesn’t have an effect on diet sodas and such? It’s not clear that these are any better, and could actually be much worse in the long run.

    As to the government spending the money well…well, we all know how well that works.

  • Aria Gonzalez

    I think they should absolutely stop the corn subsidies but they never, ever will. It would be political suicide.

  • shamy1972

    Democrats love taxing and regulating us to death… It’s money in their pockets!