Pity the Soda Tax

October 15, 2009 |  Tagged , | Comments Off on Pity the Soda Tax

Amid the general wrack and roil of the debate over healthcare, a dozen smaller dramas have played out.  The one I’ll be writing about today seems all but finished, and it proceeded along the rote lines of a typical legislative tragedy.  To wit; a good idea is put forward, high-minded politicians dutifully offer it guarded praise, and then a wealthy interest lobby smothers the proposed measure in its crib and everyone goes on like nothing happened.

This time our protagonist was a federal excise tax on soft drinks.  That was one of several revenue generators proposed last spring in the early stages of the health-care reform fight.  At the time President Obama and several other legislators called it an idea “worth considering,” which is about like describing a potential date as “a really nice person.”  We can assume that such tepid praise anticipated the vociferous opposition of the well-heeled beverage lobby, in the face of whose frothy, hammering assault the measure went down like a clubbed seal.  It does not appear on the current Senate version of the proposed bill.

Which is a shame, because there are a number of good arguments for it.  Many of them were laid out in a short article that two doctors, Kelly Brown and Tom Friedan, published in the New England Journal of Medicine on April 30.  The gist of the doctors’ case was this: First, the evidence linking soft drink consumption to obesity and diabetes is conclusive.  Especially telling is the significant increase in consumption of soft drinks by children over the course of the last few decades, and the very strong link between daily consumption of those drinks by children and their risk of obesity.  Second, there is good economic evidence that the demand for soda is strongly influenced by price signals.  An analysis by the soft drink industry found that increasing the price of soda by 6.8% caused sales to fall by 7.8%.  Kelly and Friedan concluded that a penny an ounce excise tax on drinks sweetened with sugar or corn sweeteners, which would reduce consumption by an estimated 13%, would have a positive effect on public health, not to mention raising billions of dollars.

They also pointed out that the relative costs of sweet drinks and fruits and vegetables have changed dramatically in the last 30 years (sodas have gotten cheaper while produce has gotten more expensive), and that beverage companies take advantage of massive advertising budgets and the information asymmetries created by dubious health claims (Vault gives you energy!  Sunny D contains vitamin C!) to sell their products to children.  Given all that, it seems that a soda tax is a reasonable, even desirable method for both improving health and funding health-care.

Not so! says the beverage industry, along with its hastily astro-turfed “citizens group,” Americans Against Food Taxes.  As is often the case with people primarily motivated by the fat piles of cash they stand not to make if something changes, their arguments tend to be disingenuous when they aren’t outright dumb.  They argue, for example, that taxing soda will not completely eliminate the problem of obesity, as though a partial solution is worse than so solution at all.  They argue that taxing soft drinks is regressive, as though the staggering costs of diabetes and other obesity related illnesses don’t also weigh most heavily on the poor.  They, argue, perhaps most shamelessly, that the government shouldn’t distort the free market by imposing an additional tax on sweetened drinks, as though the extremely low cost of those drinks owes nothing to the massive federal subsidies of corn and sugar.  They present themselves as opponents of “food taxes” to lobby on behalf of a product that is not food, by any reasonable definition of the term.  And they’ve won.

Proving once again that, in politics, even the flimsiest idea can be quite imposing when it’s presented atop a dump-truck full of money, our senators and congress-people bravely chose to ignore the evidence, cave to the demands of a citizens group founded by Coke and PepsiCo, and write a Dear John letter to the poor, hapless soda tax.  Instead they’ll fund healthcare with a heady mix of higher taxes on existing insurance plans and deficit spending.

But don’t give up all hope.  The soda tax may not make it into the federal health care reform bill, but the idea is out there, ripe for action at the state level.  And Tom Friedan, one of the authors of that article in the New England Journal of Medicine, is now the head of the Center for Disease Control and Prevention.

Photo courtesy of Flickr user kt.


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