Soda Tax

fat tax

A soda tax is a surcharge on soft drinks. It may focus on sugar-sweetened beverages (soda sweetened with sugar, corn syrup, or other caloric sweeteners and other carbonated and uncarbonated drinks, and sports and energy drinks). As an example of Pigovian taxation (a tax levied on a market activity that generates negative externalities), it may aim to discourage unhealthy diets and offset the economic costs of obesity.

France is in the process of introducing a tax on sugary drinks for 2012; following introduction, soft drinks are estimated to be up to 3.5% more expensive. The city of Richmond, California has placed a soda tax on its 2012 ballot. Soda consumption has been noted as a contributing factor to the obesity epidemic and medical costs related to obesity. In 1994, an early soda tax was introduced by Kelly D. Brownell, Director of the Rudd Center for Food Policy and Obesity at Yale. In 2009, 33 US states had a sales tax on soft drinks. Support for a soda tax has been higher when pollsters say the money will go towards health care.

To counter the problem of children’s easy access to soft drinks, in 2005 the American Beverage Association (the largest US trade organization for soft drink bottlers) began working to remove soft drink machines from primary schools, and to replace soft drinks with healthier beverages such as orange juice or milk. High schools would have a 50/50 balance of machines dispensing soft drinks and healthier alternatives. Although orange juice may have a few more calories than cola, it also has other nutrients and fiber. In 2009 the American Heart Association (AHA) reported that the soft drinks and sugar sweetened beverages are the largest contributor of added sugars in Americans’ diets. Added sugars are sugars and syrups added to foods during processing or preparation and sugars and syrups added at the table. Excessive intake of added sugars, as opposed to naturally occurring sugars, is implicated in the rise in obesity, and the AHA adds that no more than half of a person’s daily discretionary calorie allowance should come from added sugars.

Fighting the creation of soft drink taxes, the American Beverage Association has spent considerable money to lobby Congress. In the 2010 election cycle, its lobbying grew more than 1000 percent to $8.67 million. These funds are helping to pay for 25 lobbyists at seven different lobbying firms. An industry group called ‘Americans Against Food Taxes,’ backed by juice maker Welch’s, soft drink maker PepsiCo Inc, the American Beverage Association, the Corn Refiners Association, McDonald’s Corporation and Burger King Holdings Inc is running national advertising and conducting lobbying to oppose these taxes. The group has characterized the soda tax as a regressive tax, which would unfairly burden the poor.

In the case of New York’s effort to introduce a tax, although the positive health message was supported some groups like the New York Academy of Medicine and editorial writers, groups such as New Yorkers Against Unfair Taxes, set up by beverage companies, grocers, teamsters who represent drivers and production workers, and others, lobbied against the measure. The anti-tax forces argued that the tax was based on dubious science, because obesity was a matter of how many calories people consumed, not where those calories came from. The idea that the soda tax would cut into the income of poor New Yorkers while doing nothing to improve their access to exercise or fresh, affordable, healthy food was echoed by some advocacy groups for the poor. For example, Triada Stampas, the director of government relations for the Food Bank of New York City, testified against the tax before a Senate committee.

PepsiCo’s world headquarters is in Purchase, N.Y., and lawmakers in the Westchester County area and in districts with bottling companies of all kinds quickly lined up against the tax. The economic argument swayed even with some Democrats who otherwise tend to favor taxation. In New York, the opposition managed to put a negative spin on the idea almost from its inception in the 2009 budget proposal. The tax that the governor’s allies referred to awkwardly as a ‘sugary beverage tax’ became known in the vernacular as ‘the fat tax,’ which sounded like a rebuke to anyone concerned about their weight. Related TV ads from New Yorkers Against Unfair Taxes, made the case that the tax would hurt consumers. In the ad, a mother was shown unpacking groceries as her son mixes a powdered lemonade, one of the drinks that would be taxed. ‘Tell Albany to trim their budget fat and leave our groceries alone,’ the mother says.

By most accounts, the beverage industry has outspent the pro-tax side and succeeded in painting the soda tax as a naked money grab cleverly disguised as a health policy. Estimates of the amount spent by the Alliance for a Healthier New York, in support of the tax, range from $2.5 to $5 million. The American Beverage Association spent $9.4 million in only the first four months of 2010 to oppose New York’s soda tax. Most of the money was spent on advertising, media and strategy. Some opponents suggested New Yorkers would try to evade the tax by buying soda on Native American reservations, where some smokers go to find tax-free cigarettes, or by crossing the border to New Jersey, harming New York retailers.

The latest science has raised considerable doubt about the long held adage that any food or beverage can be part of a well balanced diet. For example, recent studies have shown that consumption of a can of soda a day raises one’s risk of a heart attack by twenty per cent. The same study showed that soda consumption was accompanied by decreases in HDL (high density lipoprotein) and increases in triglycerides (TG). The pattern of low HDL and elevated TG predisposes one to heart attacks. Other studies have shown that regular consumpion of sugar sweetened beverages results in type 2 diabetes mellitus, weight gain, and also promotes cancer growth. Researchers have shown that when healthy 18-24 year olds have sugar-sweetened beverages substituted for bread and crackers in their diet, calorie for calorie, the sugar sweetened beverages cause an alarming increase in small dense LDL particles within two weeks. Small dense LDL particles cause cornary artery blockages leading to heart attacks.

Studies find that large loads of fructose, like that seen in sugar sweetened beverages, overwhelms the liver’s ability to metabolize the sugar by the normal pathway and the excess is shunted into pathways which result in fat production. The fat packs the liver as well as our waistlines. The fatty liver begins to malfunction and no longer responds normally to insulin, which results in a condition known as insulin resistance. The pancreas tries to compensate by putting out increasing amounts of insulin. The pancreas eventually fails from overwork. Diabetes results. Unhealthy fats like small dense LDL (low density lipoprotein) and triglycerides are also released into the bloodstream. The unhealthy fats eventually plug up the arteries of the heart. The medical term for the syndrome which results is metabolic syndrome. It consists of abdominal obesity, high blood pressure, high levels of LDL and TG, and an elevated fasting glucose. Most patients with metabolic syndrome go on to develop diabetes and coronary heart disease.

A meta-analysis specifically asking to what extent sugar-sweetned beverages have contributed to the obesity epidemic concluded that: sugar-sweetened beverages account for at least one fifth of the weight gained between 1977 and 2007 in the U.S. population and that actions that are successful in reducing sweetened beverage consumption are likely to have a measurable impact on obesity. Furthermore, the Department of Health & Human Services reports that the tax could generate $14.9 billion in the first year alone. The Congressional Budget Office (CBO) estimates that a 3-cent-per-ounce tax would generate $24 Billion over four years.

Taxing soda can lead to a reduction in overall consumption, according to a scientific study published in the ‘Archives of Internal Medicine’ in 2010. The study found that a 10 percent tax on soda led to a 7 percent reduction in calories from soft drinks. These researchers believe that an 18 percent tax on these foods could cut daily intake by 56 calories per person, resulting in a weight loss of 5 pounds (2 kg) per person per year. A 2010 study published in the medical journal ‘Health Affairs’ found that small taxes on soft drinks do little to lessen soft drink consumption or prevent childhood obesity, but larger taxes probably would. The study’s author said that if taxes were about 18 cents on the dollar, they would make a significant difference in consumption. A 2012 study published in ‘Health Affairs,’ estimates that a penny per ounce tax on sugared beverages could prevent 2.4 million cases of diabetes per year, 8,000 strokes, and 26,000 premature deaths over 10 years.

However, a 2009 study in the journal ‘Contemporary Economic Policy’ determined that a percentage point change in a soft drink tax would affect body mass index (BMI) by a very small amount—about 0.003 points. Research from Duke University and the National University of Singapore released in 2010 tested larger taxes and determined that a 20 percent and 40 percent taxes on sugar-sweetened beverages would largely not affect calorie intake because people switch to untaxed, but equally caloric, beverages. Kelly Brownell, a proponent of soda taxes, reacted by stating that ‘[t]he fact is that nobody has been able to see how people will really respond under these conditions.’

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