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Legacy Content / GLOSSARY: TAXES

Sugary Beverage And Alcohol Tax

As lawmakers consider ways to pay for health reform, use our glossary of potential offsets to get caught up fast.

July 23, 2009

Updated at 2:34 p.m. on Nov. 24 to reflect continuing legislation.

Definition

A sugary beverage tax would add a federal excise tax on non-diet sodas, juices and sports drinks. Standardizing federal taxes on alcohol would amount to 25 cents per ounce of alcohol, an increase of 4 to 17 cents, depending on the type of alcohol.

Executive Summary

Not only would taxing sweetened beverages raise cash, but supporters also cite its potential to improve personal health by decreasing consumption of highly caloric drinks.

 

An article published in April's New England Journal of Medicine pointed out that the intake of calories from sugary beverages per person has increased by 30 percent during the past 10 years, which could be adding to the risk of obesity, diabetes and heart disease. John Sheils, senior vice president at the health policy consulting firm The Lewin Group, who testified before the House Committee on Energy and Commerce about health care reform last month, said he favors "the options that encourage people to improve their health behaviors at the same time as raising revenues," like the beverage tax.

But soda manufacturers, who anticipate seeing a drop in sales, and customers, who would be charged higher prices for beverages, are less excited by the possibility of the tax. A January robo-poll of 1,000 adults conducted by Rasmussen Reports found 70 percent of respondents opposed to a national tax on non-diet soft drinks, and a Quinnipiac poll of New Yorkers in February also found 65 percent opposed to a soft drink tax, which was being considered in the state.

All of the other players in the beverage industry -- advertising agencies, grocery stores, vending machine operators, sugar and corn syrup manufacturers -- would ultimately be impacted by a tax. Earlier this month, the American Beverage Association announced a new coalition of beverage-related organizations, called Americans Against Food Taxes, aligned against a potential beverage tax. The group now consists of more than 200 companies, and, it claims, over 30,000 individuals have signed a petition on its Web site opposing the tax.

"The coalition is designed to get the word out as broadly as we can that adding to the burden of middle-class families with taxes isn't the way to go with addressing health care reform," said coalition spokesman Kevin Keane. "We agree that health care reform is needed. But you're not going to fix the complexities of health care reform with a tax on soda pop."

To the argument that the tax would improve personal health, the group contends that education is the only way to encourage balanced caloric intake. West Virginia started imposing a state excise tax on soft drinks in 1951, but it ranks third amongst the states in obesity and first in diabetes, according to the Trust for America's Health 2009 report.

Max Savings

According to a Congressional Budget Office report released in December, a national excise tax of 3 cents per 12 ounces of sugary beverage -- that's 3 cents for a can of Coke or 5 cents for a 20-ounce bottle -- would yield $50 billion over 10 years, while potentially reducing overall health care costs because of the link between sugar intake and health conditions like diabetes and obesity.

In the same report, the CBO suggested that standardizing federal taxes on alcoholic beverages to 25 cents per ounce of alcohol would increase revenue by $60 billion over 10 years. Currently, different types of alcoholic beverages are taxed at different rates: 21 cents per ounce of alcohol in distilled spirits, 10 cents per ounce of alcohol in beer and 8 cents per ounce of alcohol in wine.

Plans

Neither the House bill nor the Senate plan includes a beverage tax as a form of funding, though such a provision could still re-emerge in the amendment process. Keane said the ABA was “cautiously optimistic” that a beverage tax would be kept out.

Links

"Ounces of Prevention -- The Public Policy Case for Taxes on Sugared Beverages" (New England Journal of Medicine, April 30, 2009)

Rasmussen Poll, January 2009

Americans Against Food Taxes

Trust for America's Health, 2009 Report

Congressional Budget Office Report (Options 106 and 108)

• Lawyers, Beverage Lobby 'Cautiously Optimistic'

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