Thursday, February 10, 2011

Kick the Can: Considering the Soda Tax

Governments at all levels are looking under their collective couch cushions for every penny they can find. Creative revenue generating ideas range from taxing pornography, to building racinos, to (legalizing and then) taxing marijuana. These are all variations on the tried-and-true “sin tax” formula.

A family friendly, PG version of a sin tax idea has been recently kicked around in the form of a soda tax. The U.S. Senate considered the tax in 2009 as a way to help pay for President Obama’s health care initiative. Both the Mayors of New York and Philadelphia as well as New York Governor David Patterson sought soda taxes in recent budget proposals.

On the surface, the soda tax idea is a good one: Offset the costs of healthcare programs with the tax, while simultaneously battling the obesity epidemic. It’s roughly the same justification for the steep rise in cigarette taxation in recent years. One could make the argument that, in fact, the nation’s obesity epidemic is of a greater public health concern than are the impacts of smoking.

But, the issue isn’t so clear cut. Is the soda tax justifiable when there is no essential nexus between the tax and the programs it supports? If the soda tax revenue is simply funneled into a state’s general fund, is it still justifiable on public health grounds?

What of a state budget that purports to use the funds for health care programs, but also makes cuts to those same programs in the same budget, as this article points out? What if the soda tax did not actually reduce soda consumption, as some studies claim that it would not?

Considering that a sales tax is regressive, and considering that some studies show that the poor tend to consume more sugary beverages than the average citizen, wouldn’t the brunt of the tax fall disproportionately on the poor? Is the tax equity issue enough to undermine the purported health benefits?

The soda tax debate is representative of the type of dialogue we're likely to see in the coming months as Minnesota looks to fill its 6.2 billion dollar revenue gap with new and creative funding sources.

Please, anything but a pizza tax.


  1. The idea of "new" or "innovative" taxes (soda, marijuana, etc) presents a new stream of revenue for municipalities, unfortunately it does nothing to solve the real problem. It allows for short term and partial relief to problems that need more than a short term fix. Food for thought. . .

  2. In Minnesota, soda is already taxed, and I do not object to that policy. While regressive, a tax on a truly optional product is less objectionable to me than extending the sales tax to clothing or food.

  3. Why not simply tax unhealthy foods (soda) and subsidize healthy ones?

  4. I am thinking if we tax soda because it's unhealthy, then what about Mcdonalds, KFC, ...? The list can go on forever. Also, who has the right to decide what is "unhealthy" and so should be taxed? Further, if these unhealthy food are giffen goods, according to economics theory, the poor will actually consume more instead of less. So it seems to me that the policy maker might get exactly the opposite of what he wants.