Will Adding a Soda Tax Wind Up Saving Taxpayers Some Money?

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Nobody likes taxes, least of all me. But what the much-discussed idea of taxing sugary soft drinks boils down to is this: Does it make more sense to pay up when you buy Dr. Pepper, or when we all pay the doctors’ bills and rising health insurance premiums related to guzzling way too much Dr. Pepper?

The New England Journal of Medicine just released a report endorsing the taxation of sugar-sweetened beverages, most obviously soda, but also energy drinks and many juices and teas. Basically anything with high-fructose corn syrup. The purpose of such a tax would be twofold: 1. Discourage people (kids in particular) from drinking stuff they probably shouldn’t be drinking. 2. Help pay for the costs of health care related to too many people drinking stuff they probably shouldn’t be drinking.

On the one hand, taxes of any sort suck. On the other, at least if they’re taxing soda, you have the choice not to buy it—and the manufacturers have a choice to adjust ingredients and make them healthier. (Although honestly, I cringe at the idea of Coca-Cola coming up with some sugar-free, high-fructose-free, delicious-free soft drink to circumvent any tax, should one come to fruition. Whatever the drink is will probably make consumers nostalgic for New Coke.) Without a tax on sugary drinks, we’re not raising any money to cover national health care costs, and so we all have to cover those bills in other ways, probably through ever-rising health insurance premiums or perhaps an increase in income taxes. And folks don’t really have the choice to not pay those bills in the same way they have a choice to not buy Mountain Dew—unless you want to risk going without insurance (and being fined, if and when insurance becomes mandatory) or risk going to jail (because you didn’t pay your taxes).

The NEJM report says that funds raised from a new tax would be quite substantial:

The revenue generated from a tax on sugar-sweetened beverages would be considerable and could be used to help support childhood nutrition programs, obesity-prevention programs, or health care for the uninsured or to help meet general revenue needs. A national tax of 1 cent per ounce on sugar-sweetened beverages would raise $14.9 billion in the first year alone. Taxes at the state level would also generate considerable revenue — for example, $139 million in Arkansas, $183 million in Oregon, $221 million in Alabama, $928 million in Florida, $937 million in New York, $1.2 billion in Texas, and $1.8 billion in California.

Of course, beverage manufacturers hate the idea of a soda tax. From the NY Times:

Muhtar Kent, the chief executive of Coca-Cola, was asked about the tax on Monday during an appearance at the Rotary Club of Atlanta and he responded by calling it “outrageous”

“I have never seen it work where a government tells people what to eat and what to drink,” Mr. Kent said, according to a report by Bloomberg News. “It if worked, the Soviet Union would still be around.”

When in doubt, invoke the Iron Curtain. I am sympathetic, however, to claims that such a tax unfairly targets soda. We consume all sorts of unhealthy foods and beverages. Are we going to tax them all? Or tax them based on the grams of fat or sugar per serving? Do we just start fining obese people for every pound they are overweight?

That seems nuts, of course. But at some point, there’s got to be a way to encourage personal responsibility. It wasn’t fair that the general public was footing the health care costs related to smoking, and now there are some especially hefty taxes on cigarettes that help cover some of those costs. I love the tax. Then again, cigarettes are proven to kill people, and I don’t smoke. (For one reason, they cost too much money!) Stats show that the cigarette tax and smoking bans have decreased smoking drastically. Will a tax on soda make people healthier? Somehow, I doubt it. But at the very least, if we tax soda, some money will be raised to—in theory—help pay for health care costs that are out of control partly because people have poor diets.

I wonder what the reaction would be from taxpayers if we could all see the numbers, and if we could be reassured that money raised from taxes would actually get to where it was needed. (Those are some really big “ifs.”) For instance, the government would propose the options of either: 1. Implementing a soda tax, which would cost the average family an extra $300 annually (I’m using totally made-up numbers) to their beverage bill. Or 2. Jacking up income taxes that would cost the average family $300 a year.

Which would you prefer? Tax now or tax later? Your answer probably depends on how many Diet Cokes are currently in your fridge.

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