The Soda Tax Solution

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The science linking consumption of sugar-sweetened beverages (SSB) to increase health risks is overwhelming.  From increased risk of dental caries to childhood obesity to coronary heart disease, the message is clear – SUGARY SODA IS BAD FOR YOUR HEALTH!

So what?  There are a lot of foods out there that are bad for your health (twinkies, ding dongs, Dangerously Delicious Pies) and they are not the target of increased taxes.   Opponents make the personal responsibility argument and say that the government should not intervene on personal choice, especially with food, and that taxing SSB is regressive and not proven to even reduce obesity (shockingly similar argument the tobacco industry is making here)

However, SSB present certain problems that require action, and in my view, a comprehensive policy intervention that includes a “soda tax.”  According to the Robert Wood Johnson Foundation, in 2004 adolescents consumed an average of 300 calories per day from SSB, accounting for 13 percent of their daily caloric intake, a 200% increase from 30 years ago.  Not surprising, the prices of sodas have dramatically fallen related to inflation during that time period (Fig.1), while the Coca-Cola Company had a gross profit margin of 64%, meaning that the actual cost of making its products was one-third of its total revenue.

These market failures bring us to our current situation, where overweight and obesity-attributable medical spending accounts for 9.1 percent of total annual U.S. medical expenditures in 2006 ($147 Billion), 50% of which is financed by Medicaid and Medicare, a rate that now rivals that attributable to smoking according to Health Affairs.

The physiological and economic argument linking SSB to the rise in obesity forces the U.S. government to act.  The New England Journal of Medicine suggests that an excise tax of 1 cent per ounce of beverage would increase the cost of a 20 oz. soft drink by 15 t0 20%, which in turn would conservatively reduce consumption by 10%.  The state of Maryland should adopt this tax policy where the designated tax revenue from the soda tax could be used to promote nutrition programs, obesity prevention programs, and other educational initiatives that improve health and reduce cost.  This Soda Tax Solution, similar to the public health policy efforts aimed at reducing tobacco use, will provide the necessary  disincentives for people to make smarter and healthier beverage choices.

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5 Responses to “The Soda Tax Solution”

  1. urwin01 Says:

    I am intrigued by this debate! Is there research that demonstrates a causal association between drinking soda and obesity, and is that association stronger than with foods with high fat/sugar/caloric content? Could super-size portions be taxed because they are also unhealthy? In principle I can certainly understand the arguments for soda taxation, but I can also see flaws in the argument that lawyers could (and do!) easily use to persuade the legislature against the adoption of such a law. Markamarino refers to the extraordinary profit margins enjoyed by soda manufacturers such as Coca-Cola. Does the debate around soda taxation acknowledge the culpability of the soda manufacturers or advocate for increased regulation of this industry? There have been some efforts within the industry to self-regulate food and beverage marketing to children (although many think these have not been sufficient or successful), but I am not aware of any attempts to reduce sugar/high fructose corn syrup content in regular sweetened soda beverages, either by self regulation or through federal recommendations.

  2. Barraw Makia Says:

    You bring up very interesting points Urwin, but I think Markamarino’s proposal and yours should not be mutually exclusive. In response to the question of whether “unhealthy” portions or foods should be taxed, too, I say, Don’t let the perfect be the enemy of the good- We’ve got to start somewhere.

    I think a multi-pronged approach where clear regulations are imposed on high fructose corn syrup/unhealthy fatty acid products and supplemental taxes levied on products whose contents cross a predetermined fatty acid/ corn syrup threshold will be more effective.

  3. drah2010 Says:

    This is a debate that I believe we’ll see more of, given the crippling rates of obesity in the U.S., and especially among children. And given the impact that obesity bears on health care medical costs each year, taxpayers will ultimately bear the burden. I think that if the U.S. goes down the path of taxation to offset education, physical training, etc., there will have to be a more level playing field approach taken. Similar to what Barraw suggests, with thresholds for specific “bad” ingredients under which products would not be taxed. I do have to laugh at the “SSB” acronym, as sugar likely isn’t the ingredient of issues – – it would be high-fructose corn syrup.

    Of course, the U.S. could go the route of other countries, and just declare some ingredients completely illegal – – partially hydrogenated fats for instance. But I suspect that such action would be an uphill battle given the strength of lobbyist organizations.

  4. cristinamannie Says:

    Thank you Markamarino for your blog and the thought provoking debate presented by those who have responded. I agree with you that more comprehensive policy interventions are required and should include regulation of the food industry with the purpose of ensuring more responsible food production so that the public have healthier food products and that we’re equipped by food labelling to more easily make healthier food choices. Real change really does require a more ecological approach with intervention aimed at all levels (to include organizations) and not just aimed at individual behaviour. I believe tax can play an important role in influencing behaviour especially when combined with other measures and send out a clear message to consumers that highly sugared drinks can be bad for your health, especially if they were to be marked as products to which the ‘sugar tax’ applies. In addition to South Africa’s new law regulating salt in commonly consumed foods such as bread and cereal which has just come into effect (please visit my post), our Minister of Finance also announced in his 2016 budget speech that a sugar tax on fizzy drinks was to come into effect 1 April 2017. Necessity is the mother of invention and need for large corporations to continue to generate profits may just be the stimulus needed for the development of new products to feed a new demand for healthier food and beverage options. Barraw Makia made an interesting point about portion size – I think some guidelines regulating portion size in some way would be beneficial. There’s an interesting popcorn study that was performed by Brian Wansink who ran the Food and Brand Lab at Cornell University in which free popcorn (which was intentionally stale) was given to moviegoers (some got a much larger bucket than others) to test whether people ate more popcorn when you gave them a bigger container. He concluded that they did, even when it wasn’t palatable! It seems as though it’s just human nature that reason needs to be supported by nudges and by a little force at times (like a sugar tax or a standard smaller popcorn bucket size) to help us make different choices.

  5. cristinamannie Says:

    Sorry, my hyperlinks included don’t seem active. I attached a link to the popcorn study: http://www.jneb.org/article/S1499-4046(06)60278-9/abstract

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