POPPING THE SODA BALLOON
May 21, 2010
The Washington D.C. City Council is set to vote May 25 on its 2011 budget and, included in the list of potential line items, is the contentious "soda tax," a 1 cent per-ounce tax on bottled and canned soda intended to pay for a healthy schools initiative designed to address childhood obesity.
The National Center for Policy Analysis (NCPA) published a study on proposed new excise taxes in July 2009, around the time the Obama administration began floating the trial balloon by mentioning the possibility of a national soda tax to pay for health care reform. What they found is what most economists already know: despite proponents of excise taxes claiming that they are easier to collect, are paid by those who benefit directly from the service or good, and offset the costs individuals impose on society due to their bad habits, they are in fact highly regressive, inefficient, unfair and, in the case of the soda tax, do little to combat obesity.
- Increasing the soft drink tax by 55 percentage points would decrease the obese and overweight population by only 0.7 percentage points.
- That means a 27.5 cent tax on a 50 cent can of soda would only lower the number of the obese and overweight from 66 percent to 65.3 percent of the population.
Such excise taxes are also highly regressive:
- On average, the bottom fifth of income earners spend 1.7 percent of their gross income on alcoholic beverages compared to 0.6 percent for the top 20 percent.
- They spend 2.5 percent of income on tobacco products versus 0.2 percent for the top 20 percent.
- They spend 9.9 percent on gasoline and motor oil compared to 2.3 percent for the top 20 percent.
Source: Sarah Lee, "Popping the soda balloon," Washington Examiner, May 21, 2010.
For NCPA study:
Browse more articles on Tax and Spending Issues