Soft-Drink Tax Could Pare Waistlines, Cover Health-Care Costs
By Elizabeth Lopatto
September 16, 2009

Sept. 16 (Bloomberg) -- A penny-per-ounce tax on soda and other sugary drinks would raise about $150 billion over a decade while slimming Americans' waistlines, according to a report from public health and economic researchers.

If sugar-sweetened beverages from makers including Coca- Cola Co. and PepsiCo Inc. were taxed at that rate, the U.S. could raise $14.9 billion in the first year, according to the article in the New England Journal of Medicine. The tax would also encourage people to cut back on soft drinks, cutting their daily calorie intake by at least 10 percent, the authors said.

The rate of obesity, a major cause of diabetes, stroke, and heart attacks, has more than doubled in the last 30 years, according to the U.S. Centers for Disease Control and Prevention. Soda and other sugary drinks have been linked to more calories eaten, leading to more pounds, according to background information in the report.

"If you take diseases related to diet, with obesity as the most visible, where do you start?" said Kelly Brownell, the report's lead author and director of Yale University's Rudd Center for Food Policy and Obesity. "We thought we'd start where the science is strongest. Liquid calories are a target because the body has trouble understanding those calories in a way that allows you to regulate body weight."


Coca-Cola Chairman and Chief Executive Officer Muhtar Kent called the idea of a federal tax on soft drinks "outrageous" on Sept. 14 in response to proposals in Congress. "I have never seen it work where a government tells people what to eat and what to drink," Kent said.

President Barack Obama has said that taxing sugar-sweetened beverages to reduce consumption should be explored, in an interview from the Oct. 15 issue of Men's Health magazine. The proposal has been debated by the Senate Finance Committee. New York Governor David Patterson proposed an unsuccessful 18 percent tax on sugar-sweetened drinks earlier this year.

"This would reduce soda consumption by a faction, and sodas are less than 10 percent of the obesity equation," said J. Justin Wilson, a senior research analyst at the Center for Consumer Freedom, a nonprofit organization involved in nutrition issues that receives some food-industry funding. "What this really boils down to is searching through the couch cushions for revenue."

Medical spending for obesity is estimated to have reached $147 billion in 2008, according to a July 27 article in the journal Health Affairs.

32 Percent Obese

About 32 percent of American adults are obese, according to data from the CDC's Web site. A person is obese if their body mass index is greater than 30, which corresponds to 186 pounds for a person who is five feet, six inches tall.

Today's report cited one study that found 323 adults who added sugared beverages to their meals simply increased calorie intake, instead of substituting for other calories. Another study showed that children who drank 9 ounces or more of sugary liquids consumed 200 calories a day more than those who didn't.

Proposed taxes should be levied on producers and wholesalers of sugary drinks, which include those sweetened by high fructose corn syrup and fruit-juice concentrate, according to today's report. That may ensure the price increase is passed on to retailers. In addition, the states that exempt sugar- sweetened beverages from tax along with food should eliminate the practice, the authors said.

Taxing sugary drinks, which include those sweetened by high fructose corn syrup and fruit-juice concentrate, by the ounce means that those who currently drink a lot of sweetened drinks would be taxed more. This could encourage them to cut back on the sweetened liquids, the authors suggest.

Fewer Calories

If consumers were to drink one fewer 20-ounce drink daily in response to the tax, each would consume about 174 fewer calories a day, the authors wrote.

"It has to be a big enough tax that there will be a significant price increase," said study co-author Frank Chaloupka, a professor of economics at the University of Illinois, Chicago. "The thing that has to be kept in mind is that the tax itself isn't the single thing to cure obesity. Part of it is what we do with the revenue it generates."

The report doesn't make specific proposals about how the revenue should be spent other than to say it may "help the nation recover health-care costs associated with the consumption of sugar-sweetened beverages."

State Tax

Thirty-three states already have sales taxes on soft drinks, averaging 5.2 percent, which is too low to discourage consumption, the report said. The penny-per-ounce tax proposed in today's report would amount to a 15 percent to 20 percent increase in price, and could raise $937 million in New York, $1.2 billion in Texas, and $1.8 billion in California, the authors wrote.

That price increase would translate to about a 10 percent decrease in calorie intake for most people, Chaloupka said. A smaller tax wouldn't have enough of an effect, he said.

"While the authors suggest a 1 cent-per-ounce tax on any beverage with caloric sweeteners, there is no science to support that this would have measurable impact on our nation's waist- line," Susan Neely, the president of the American Beverage Association, said in an e-mailed statement. "Our industry has reduced calories per ounce produced by more than 24 percent since 1998, yet obesity rates continued to climb."

Other authors on the today's report include researchers at the Harvard School of Public Health, the New York Department of Health and Mental Hygiene and other universities. Funding for the research came from the Rudd Foundation, the National Institutes of Health and the Robert Wood Johnson Foundation.

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