Have your sweet treats gotten pricier lately? Is your weekly latte eating away at your retirement fund?
If so, you’re hardly alone. Taxing sugar, especially soda and other sugary beverages, seems to be the new trend. The City of Seattle implemented a tax on sugary drinks at the beginning of 2018, Philidelphia controversially implemented a tax on sugary drinks in 2017, and other US cities either have already or are considering implementing a tax. These “sin taxes” are designed to discourage people from damaging their health by consuming too many sugar-loaded beverages.
But some people are discouraged by the taxes, and say that they’re unfair and ineffective. Supporters say that the taxes will improve health and help the poor. Who’s right?
What we know for sure
Before we review the arguments, let’s establish a couple key facts:
- Consuming excessive sugar is indeed a health concern. In a 2015 press release, the World Health Organization (WHO), called for lower worldwide sugar intake and noted that children who consume large amounts of sugary drinks are more likely to be overweight or obese.
- The American Heart Association warns that “our bodies don’t need sugar to function properly” and that added sugar can add empty calories that lead to obesity and reduce heart health.
- Sugar is addictive, and Americans get a whopping 47 percent of their added sugars from beverages (excluding milk and juice) according to the 2015-2020 Dietary Guidelines for Americans.
It’s easy enough to agree that consuming less added sugar would be a good thing. But a tax on sugary drinks? Opinions on that are hardly unanimous. Here are 5 arguments for and 5 against taxing sugary drinks:
1. Argument in favor: A 20% tax could lead to a 20% reduction in consumption
In the 2015 Fiscal Policies for Diet and Prevention of Noncommunicable Diseases report put out by WHO, the organization notes that fiscal policies “have considerable potential for promoting healthier diets.” They recommend policies that improve weight outcomes, reduce diet-related health risk factors, and reduce the financial burden of noncommunicable diseases. The report suggests raising the prices on sugar-sweetened beverages (SSB) by 20 percent would lead to a “more than proportional” reduction in SSB consumption. A 20 percent (or more) reduction would have significant impact on caloric intake and reduce risk for noncommunicable diseases.
This could make a huge difference in the US, where, according to the 2013-2014 report from the National Institute of Diabetes and Digestive and Kidney Diseases, 1 in 3 adults and 1 in 6 children have obesity.
1. Argument against: It’s not effective
While sugar-tax supporters point to the effectiveness of taxes on cigarettes in reducing smoking, critics point out that sugary drinks are not tobacco, and it’s not possible, or at least plausible, to increase the taxes on SSB to rates similar to those on cigarettes. (The average US state tax on a pack of cigarettes is $1.73). Given this limitation, a well-meant tax on sugary drinks may not be effective.
According to a 2016 study published in American Journal of Agricultural Economics, sensitivity to price goes down as obesity rates go up, and people that tend to buy sugary drinks in greater quantities will avoid, at least in part, the burden of a price increase by stocking up on drinks during temporary price reductions (sales). This stockpiling behavior is more prevalent where obesity is more prevalent, and stockpilers are less price sensitive.
2. Argument for: It IS effective
The tax on sugary drinks in Philadelphia implemented in 2017 has been effective, according to a 2018 Newsweek article. Residents are now 40 percent less likely to consume sugary drinks. The tax, at 1.5 percent per ounce, is significant, but not nearly as high as the taxes on cigarettes. Consumption of energy drinks went down by 60 percent, and now Philadelphians are 58 percent more likely to choose bottled water.
The soda tax imposed in Mexico in 2013 has also started to take effect. A Bloomberg-funded study found that, when controlled for other purchasing habit factors, soda sales had dropped. In December of 2014, sales were down 12 percent from the same time the previous year. The research found that sugary drink consumption had dropped most among those who were poorest.