Sugary Drink Tax Should be on Table During Fiscal Cliff Talks, Group Says

Penny Per Ounce Tax on Soda Could Raise $160 Billion Over 10 Years

November 30, 2012

As lawmakers seek to avoid pushing America off the "fiscal cliff" at year's end, the nonprofit Center for Science in the Public Interest is urging Congress to consider adding a sugary-drink tax to the mix. A penny-per-ounce tax on soda and other sugar-based beverages would raise $160 billion over ten years even as it would make a modest dent in consumption, the group says. Even smaller soda taxes, of just a penny-per-can, could raise $10 billion over 10 years. Plus, CSPI says that the resulting decline in soda consumption would help reduce health care costs by reducing the incidence of obesity, diabetes, and other expensive health problems.

Raising tax rates on alcoholic beverages could raise another $14 billion per year, or $140 billion over 10 years, and reduce alcohol problems, says the group. Those taxes have been frozen for more than 20 years and have been severely eroded by inflation, according to CSPI.

"Soda and sugary drinks are fueling an epidemic of costly diseases, and the fact that these drinks are dirt cheap is part of the problem," said CSPI executive director Michael F. Jacobson. "A truly balanced approach to deficit reduction should not leave this easy money on the table."

In letters to members of the Senate Finance Committee, the House Ways and Means Committee, and both chambersí Budget Committees, Jacobson wrote that taxing sugary drinks is not a new idea. More than 30 states including Arkansas, California, New York, and West Virginia have imposed excise or sales taxes on sugar-sweetened drinks to generate revenue for health care or other purposes. The letter also encouraged boosting alcohol taxes.

"Americans spend about $150 billion a year on medical expenses related to obesity, of which half is paid for with Medicare and Medicaid dollars," Jacobson wrote. "While a wide variety of actions are needed to reverse the obesity epidemic, a federal levy on sugary drinks would deter some excessive consumption and allow the government to recoup at least a fraction of the public costs associated with the consumption of those beverages."

Taxes on sugary drinks are also supported by the Economic Policy Institute and the Bipartisan Policy Center. Recently, former Obama Administration Treasury Secretary Lawrence Summers endorsed the idea of taxes on sugary drinks, telling a gathering of tax economists, "Mark my words, this one will come." According to The Washington Post, Summers told the economists that the evidence is overwhelming that sugary snacks cause diabetes and cardiovascular disease.

The idea of taxing sugar and alcoholic beverages enjoys a distinguished conservative pedigree also: In 1776, Adam Smith, the "father of free market economics," wrote that "sugar, rum, and tobacco are commodities which are nowhere necessaries of life, which [have] become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation."

"Taxes on tobacco have proven to be highly effective in raising revenues and reducing consumption and harm," CSPI wrote. "The same would be true for a tax on sugary drinks and updated taxes on alcoholic beverages."


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