Soda Tax: Penalizing The Pudgy

By Lisa Smith | September 30, 2009 AAA
Soda Tax: Penalizing The Pudgy

The New England Journal of Medicine has proposed a tax on sugary beverages. The objective of the proposal is to reduce healthcare costs by reining in diet-related diseases. To achieve this objective, a one-cent tax would be levied on each ounce of sweetened beverages. While soda is the primary target, sweetened beverages such as Gatorade and Capri Sun would also be included.

The idea is the brainchild of seven national health experts.

Why It's Bad For You
Soda has been in the spotlight for most of this decade because it has no nutritional value. The consumption of high fructose corn syrup (the primary ingredient in most soda), caffeine and artificial sweeteners are questioned by various dietary authorities. In the disease department, obesity, tooth decay and bone loss have all been linked to the consumption of sugared beverages.

Even the American Beverage Association, which represents America's non-alcoholic beverage producers, marketers, bottlers and distributors, admits that it "is concerned about the obesity issue."

As a result, the industry has joined forces with the Alliance for a Healthier Generation to create School Beverage Guidelines striving to "remove full-calorie soft drinks from all schools and provide students with a range of lower-calorie, smaller-portion beverage options." Even the people who make the stuff admit that kids shouldn't drink it.

More than 15 billion gallons of soda a year are sold in the United States. The resulting empty calories account for 10% of the American diet. In a nation known for obesity and healthcare costs, soda stands out as an easy target. (Is your health hurting you financially? Check out these 20 Ways To Save On Medical Bills.)

Can't Ban It? Tax It
So would the tax work? It would certainly raise money. At 128 ounces per gallon of soda, that's a lot of pennies. The Congressional Budget Office did the math on a three-cent tax per 12-ounces of sugary beverages and came up with revenue of $24 billion over four years. Those numbers are based on one-fourth of the tax proposed by The New England Journal of Medicine.

Would the tax stop consumption? It would certainly slow it down, as prices hikes generally have that effect. Of course, cigarettes are a well-known killer and despite warning labels, taxes in excess of $3 per pack in some states and public bans in many buildings, smoking has not gone away. (Looking to add some "liquidity" to your portfolio? Check out Parched For Profits? Try Beverage Stocks.)

If the government was serious about eliminating bad behavior or bad products, those items could be banned. If parents were serious about their health and the health of their children's health, they could stop buying and using the products.

The Bottom Line
As for the tax, President Obama (a smoker!) has called it "an idea that we should be exploring" but has not proposed it as part of the healthcare overhaul efforts. The American Beverage Association, not surprisingly, is not a fan of the idea. It has used its money and muscle to lobby against the tax, recently defeating a proposal by the state of New York for an 18% tax on sugary beverages.

While a few states already have such a tax, they are in the minority. At the national level, senate leaders considered and rejected the idea earlier this year. So in the short run, at least, our wallets are safe even if our waistlines are not. (If you are worried about paying for healthcare, read Fighting The High Costs Of Healthcare for some great tips to help you save.)

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