Taxing Sodas for a Healthier Economy?

The average American drinks a gallon of soda a week, which delivers roughly 1,000 calories and no nutrition. The average American is also overweight or obese. Could changing one of those things help change the other?

A growing number of elected officials think so, which accounts for a spate of proposed new taxes on soda as a way to discourage consumption while at the same time raising money to fund other obesity-fighting initiatives. Some 20 states and cities, from New Mexico to Baltimore, contemplated soda taxes this spring. (See the top 10 bad beverage ideas.)

The reaction against them has been swift and fierce. In March, scores of soda-company employees sporting Pepsi, Coke and 7-Up gear swarmed the Kansas state senate to fight a proposal that would have added a penny in tax for each teaspoon of sugar in a nonjuice drink. That would have increased the price of a 12-oz. soda by about 10¢ and generated some $90 million in revenue a year. "I thought we might kill two birds with one stone," says state senator John Vratil, who, like counterparts across the country, has been struggling to address both a recession-induced budget gap and rising public-health costs stemming from obesity. Instead, he got an earful about how a soda tax would kill jobs, burden the poor and constitute an unwelcome government intrusion into the American diet.

Government involvement in what Americans eat is nothing new — consider the corn-industry subsidies that keep sweetener cheap in the first place. But why tax soda and not, say, ice cream, pizza or Oreos — or, for that matter, the video games that discourage kids from going outside to run around?

Washington city-council member Mary Cheh says it's because soda is where scientists have observed the clearest link to excess pounds. When Cheh set out to fund her Healthy Schools Act, which would raise food and physical-education standards at schools in D.C. — where about 40% of kids are overweight or obese — she didn't know she'd wind up going after soda. But the data overwhelmed her: The amount of soda the typical American drinks has grown by roughly 500% over the past 60 years, and of the 250 to 300 calories a day Americans have, on average, added to their diets since the late 1970s, nearly half have come from sugared drinks. "I don't want to prescribe taxes for all sorts of dietary choices," says Cheh, "but if we were going to only target one thing to make a material difference, soda would be it." (See pictures of what makes you eat more food.)

And while taxing drinks isn't perfectly clear-cut — Should sweetened tea be included? What about diet soda, which doesn't have the calories but may affect appetite control? — a soda tax is still a lot easier to implement than a snack-food sales tax, which a number of states and cities have tried over the years. In 2001, D.C. repealed its sales tax on soda, junk food and candy, partly because it was too difficult for merchants to determine which items to tax at the register. In Cheh's proposal, soda wholesalers would be charged a penny per ounce of sugared drink. That cost, amounting to 68¢ for a two-liter bottle, would be included in the price tag on the shelf.

The tougher question is whether increasing the price of soda would, in fact, reduce the number of calories people consume. Some research indicates the answer is yes. Last year, in the New England Journal of Medicine, the directors of the Centers for Disease Control and Prevention and Yale University's Rudd Center for Food Policy and Obesity wrote that a penny-per-ounce tax on soda could be expected to reduce consumption 13%, eliminating about 8,000 calories annually from the typical American's diet. That translates to 2.3 fewer pounds a year.

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