In these days of record budget deficits cash-strapped governments at all levels are looking for creative ways to raise additional revenue. Despite what government officials say one look at the numbers tells me there is little doubt that most of us will be facing substantial tax increases in one form or another in the coming year. One proposal being seriously considered by both the federal government and a number of states is the so-called "soda tax". In a perfect world we should not be raising taxes at all but if we must then it seems to me that a "soda tax" is one idea that we should carefully consider.
The Senate Finance Committee is currently considering proposals on how to pay for President Obama's Universal Health Care plan. Among the proposals, as Consumer Affairs reports: A three-cent tax on sodas as well as other sugary drinks, including energy and sports drinks like Gatorade and iced teas. When you stop to consider the numbers, the amount of soda sold in this country annually is positively staggering. According to Michael Jacobson of the Center for Science in the Public Interest "Beverage companies market more than 14 billion gallons of calorie-laden soft drinks annually. That is equivalent to about 506 12-oz. servings per year, or 1.4 servings per day, for every man, woman, and child." Now I cannot vouch for the accuracy of Mr. Jacobson's statistics but in our gut we all know that soft drinks are one of the major contributors to both childhood obesity and the alarming rise of diabetes that we face in this country. Jacobson goes on to argue that each penny of tax on a 12 ounce drink would raise $1.5 billion annually and lower consumption roughly one percent, improving overall health. The Congressional Budget Office estimates that a three-cent tax would generate $24 billion over the next four years. That is a lot of money and when one considers the various alternatives, a relatively painless way to raise revenue.
Now as you might expect trade groups like the American Beverage Association vehemently oppose this idea. But in the past the soft drink industry has been part of the problem. Many municipalities accepted annual lump-sum payments from bottling companies in exchange for exclusive rights to peddle their products in that city or town's public schools. This was very bad public policy. And so now it seems like sentiment is building to impose a tax on sodas. And it is not just the federal government. 30 states already have some form of tax on soft drinks and several more have proposals on the table. Meanwhile even cities and towns are looking at a "soda tax" as a way to help to alleviate their fiscal woes. On balance, I have to come down on the side of those who think that taxing soft drinks is a good idea. Reluctantly recommended.
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