The Cost of a Soda

Posted Oct. 01, 2009, at 7:29 p.m.

While Congress debates changes to our health care system, there is a simple, but of course controversial, way to reduce medical expenses: Tax sugary drinks.

Assessing a 1 cent per ounce tax would provide an additional $15 billion a year that could be put toward financing urgently needed health care reform. At the same time, it would help fight an obesity epidemic that accounts, by one study, for an estimated 27 percent of the soaring cost of American health care.

Those conclusions come from a new study by a team of doctors, scientists and policymakers that provides a strong argument for a federal tax on sugar-sweetened sodas. Their report was published in the Sept. 16 issue of The New England Journal of Medicine.

The tax would cover sugary sodas, teas, fruit drinks and sports drinks, but not sugar-free diet drinks. It probably would be levied on manufacturers or distributors but would mostly be passed on to consumers. Studies have shown that a tax on soda, like the taxes on cigarettes substantially reduces consumption.

The study cited research on what is called price elasticity. For soft drinks, the research shows that for every 10 percent rise in price, consumption declines 8 percent to 10 percent.

Beverage companies have shown that they recognize this fact by their strenuous opposition to any tax and their creation of an Americans Against Food Taxes campaign. The association calls itself “a coalition of concerned citizens — responsible individuals, financially strapped families, small and large businesses across the country,” but its listed members are mostly beverage companies, grocers, merchants and restaurant associations. PepsiCo threatened to move its corporate headquarters out of New York when that state considered an 18 percent tax on sugar-sweetened drinks.

Maine voters repealed a tax on soda, beer and wine to help fund Dirigo Health, but 33 other states have sales taxes on soft drinks, at a mean level of 5.2 percent. The taxes are mostly too small to affect consumption, however, and the revenues are not earmarked for health programs.

Obesity is linked with Type 2 diabetes and heart disease, which account for much of American health care spending. An added benefit of cutting back consumption of the sugar-laden drinks is that it would reduce one of the main causes of dental cavities.

Because of its benefits, this tax is worth further consideration.

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