Taxing Soda Could Trim State Deficits (and Waistlines), Says Report

"I actually think it's an idea that we should be exploring.There's no doubt that our kids drink way too much soda.” — President Barack Obama to Men’s Health

September 30, 2009

WASHINGTON—Even as 48 states and the District of Columbia are facing grim budget shortfalls, only 25 states currently impose special taxes on soda and other beverages with added sugar, and all of those taxes are very small. And according to a new paper from the Center for Science in the Public Interest, states could generate a total of more than $10 billion per year by levying a tax of 7 cents per 12-ounce can of Coke or Mountain Dew. If implemented by Congress in the form of a national excise tax, that $10 billion could make an important contribution toward paying for health coverage for all Americans.

Plus, says CSPI, the decrease in soda consumption due to a higher price would help reduce the incidence of obesity, diabetes and other costly chronic diseases. Americans spend approximately $147 billion a year on medical expenditures related to obesity, of which half is paid with Medicare and Medicaid dollars.

CSPI's report comes shortly after seven prominent nutrition experts made the case for a tax on soda in a separate paper published in the New England Journal of Medicine. Earlier this month, the prestigious Institute of Medicine included soda taxes as one of several policies that should be adopted to help reduce obesity, and a Brookings Institution committee on health reform, led by former Medicare and Food and Drug Administration director Mark McClellan, issued a report that called for a soft-drink tax. President Obama's interview with Men’s Health magazine is further renewing interest in soda taxes, according to CSPI.

"President Obama is exactly right when he say kids are drinking too much soda," said CSPI executive director Michael F. Jacobson. "Soda is dirt cheap and promotes expensive and debilitating diseases, which in turn run up health-care costs at all levels of government. Federal, state, and even local governments would be wise to institute or increase taxes on a product that causes so much medical and financial harm."

Also recently, a joint statewide study from the California Center for Public Health Advocacy and the UCLA Center for Health Policy Research confirmed that soda and other sugar-sweetened beverages are one of the largest—if not the largest—contributors to obesity. According to the study, the 24 percent of adults who drink one or more non-diet sodas a day are 27 percent more likely to be overweight than adults who don't drink soda.

On its web site, CSPI has a Liquid Candy Calculator that enables legislative staffers or citizens to calculate the revenue their state could raise from sales or excise taxes on sugar-sweetened beverages.

The Senate Finance Committee raised the prospect of soda taxes and higher alcohol taxes when it released a policy options paper on health care reform in May. Such taxes were not included in the draft legislation released by Finance Committee Chairman Max Baucus (D-MT) yesterday, nor have they been offered in an amendment during the committee’s ongoing markup, but CSPI and other health groups are still urging members of both houses of Congress to include soda taxes in the final legislation.

"About half of the states have small soda taxes and there certainly hasn't been any outrage over them," said Jacobson. "If the Senate Finance Committee decides to leave these billions and billions of dollars on the table, I suspect more state legislatures will tap soda taxes to help pay for their own prevention efforts. In fact, more states could do what New York City is doing, and fund an ad campaign designed to discourage soda consumption."


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