NCPA - National Center for Policy Analysis

Soda Taxes: Regressive and Unnecessary

February 14, 2017

The following article by NCPA Senior Fellow Thomas Hemphill appeared in RealClearPolicy:

In November 2016, political efforts to attach a major tax on the consumption of soda and other sugar-sweetened beverages (SSBs) registered several local government successes. In San Francisco, 62 percent of voters passed a referendum assessing a one-cent-per-ounce soda tax that applies to SSB distributors effective on January 1, 2018, while in nearby Oakland, 61 percent of city residents passed a referendum on a one-cent-per-ounce soda tax taking effect on July 1, 2017.

In Albany, another Bay Area municipality, 71 percent of voters passed a one-cent-per-ounce soda tax to be implemented in 2017. In Boulder, Colorado, 54 percent of city residents passed a two-cent-per-ounce soda tax, the steepest such tax in the nation, effective July 1, 2017. Lastly, in Illinois, the Cook County Board of Commissioners passed on a 9-8 vote a one-cent-per-ounce soda tax, to be implemented July 1, 2017.

A soda tax internalizes the negative externalities of market activities -- in this case the "public" health costs of obesity and other diseases -- by assessing at least a portion of these costs to consumers or soft drink manufacturers. Soda taxes are also flat taxes, thus regressive in nature, negatively impacting lower-income consumers.

According to data compiled by the Robert Wood Johnson Foundation, as of January 1, 2014, 34 states and the District of Columbia applied sales taxes to regular, sugar-sweetened soda sold through food stores, and 39 states and the District of Columbia applied sales taxes to regular, sugar sweetened soda sold through vending machines. The average tax on soda sold in food stores was 5.172 percent, with a maximum rate of 7.0 percent, while the average tax on soda sold in vending machines was 5.261 percent, with a maximum rate of 7.0 percent.

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