Hold on to your soft drinks, supermarkets — here comes another sin tax. Legislators in New York, Massachusetts and elsewhere have proposed taxing sweet snacks and sodas by as much as 18%. In doing so, they hope to tackle two nagging problems: obesity and budget shortfalls.
The concept of charging people for unhealthful choices certainly isn't new. More than 30 states currently have sales tax on candy or soft drinks, and many have come down hard on those traditional bad boys, cigarettes and alcohol.
With the economy in the dumps, however, this latest round of tax proposals seem to have a particular urgency to them. New York Gov. David Patterson hopes to raise more than $400 million a year by implementing an 18% tax on all non-diet sodas and fruit drinks with less than 70% natural fruit juice. Similarly, Massachusetts Gov. Deval Patrick has proposed a 5% tax on candy and soft drinks, which he hopes will raise more that $43 million for the state.
Supporters of these tax measures say they're helping curb unhealthy habits, while at the same time donating the excess to health care, education and other public initiatives in need. They point to the success of cigarette taxes like the one in New York, which was just raised by $1.25 and is expected to make 140,000 smokers quit this year, according to the state's health commissioner. They also highlight studies like the one recently conducted by Harvard University researchers, which found that a 35% price increase on regular soft drinks led to a 20% decrease in sales.
Sugar-laden beverages are widely believed to be the leading cause of obesity in children. In New York, one out of every four people is obese — a 14% increase since 1995.
“Obesity causes $6.1 billion a year in extra health care costs, and that's a bill we all have to pay,” said Richard Daines, M.D., New York's health commissioner, in a video posted on YouTube in support of the state's tax.
Detractors, which include nutritionists and health care professionals, question the plan's effectiveness, saying that a 5% tax like Massachusetts' proposal wouldn't put much of a dent in consumption. Business interests like the American Beverage Association call the taxes a “money grab” that targets the middle class. They also say it's unfair to single out one or two industries.
If passed, these taxes would seem to signal a sales shift toward low-calorie, all-natural beverages and snacks, but supermarkets should note that even some of these products are getting snared in the proposals. Fizzy Lizzy beverages, which contain half fruit juice and half seltzer water, have just over 100 calories yet stand to be taxed like a soft drink under New York's plan.
“These categories they're using are outdated and don't really reflect the plethora of drinks that have come out over the past 20 years,” said Liz Morrill, president of Fizzy Lizzy.