CORRECTION: The original article incorrectly spelled the name of UCSF associate professor Kirsten Bibbins-Domingo. The story has been corrected.
El Monte and Richmond, California, are vying to become the first cities in the U.S. to tax soda. Voters in both cities will have the chance to approve a one-cent-per-ounce tax on sweetened drinks. Officials in both cities expect the tax could generate millions of dollars in much-needed revenues. The fiscal implications for health care could also be significant.
Studies suggest that the tax would dissuade consumers, causing a 10 percent drop in soft-drink consumption. Lowering consumption could also lower medical bills. Fewer people drinking sugar-water may prevent thousands of cases of heart disease and diabetes in California each year.
Kirsten Bibbins-Domingo is an associate professor of medicine and epidemiology at the University of California, San Francisco, and has studied the potential impact of a soda tax. “The magnitude of those health care savings is in fact greater than the amount generated from the penny-per-ounce tax,” says Bibbins-Domingo. “When we estimated these nationally, we found that the savings would be on the order of $17 billion over the next decade.”
The soft-drink industry is not sweet on that message. Perhaps wary of a precedent that could lead other cash-starved cities to tax soda, the industry is spending around $3 million to defeat the tax in California. The soda industry is running ads in Spanish and English warning consumers that the tax will add another $1.44 to the cost of a 12-pack of Coke.
But even some who are not on the soft-drink payroll have problems with the soda tax. Joseph Thorndike, who is the director of the Tax History Project at Tax Analysts, a nonprofit tax publishing company, opposes the soda tax because he thinks it’s unfair. “Why aren’t we taxing ice cream or beer. These things are all contributing to the obesity epidemic, but we’re not targeting them,” says Thorndike.
The idea of a ‘sin tax’ is nothing new. In fact, until midway through the twentieth century, Thorndike says, the federal government raised substantial revenue by taxing non-essential consumer goods. During World War I, the federal government taxed soda and ice cream. It has taxed everything from jewelry and furs to margarine and chewing gum. But even during the 30s and 40s, economists complained that the taxes were unfair. So, they were abandoned in favor of a fairer income tax. Thorndike says a soda tax would discriminate against the poor: Low-income Americans drink the most soda and would also pay most of the taxes.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.