MAKING A FEDERAL CASE ABOUT SODA TAX

The Chicago Federal Reserve Bank issued a study last week on the impact of expanding taxation on sugar sweetened beverages (SSBs). In the old days (pre my hating Coca-Cola  Part 1 and Part 2), I would have argued against the tax expansion for purely personally reasons of loving Diet Coke. Now that I no longer support the Coca-Cola Company, my argument against the tax has to do with the study’s references to combating obesity by raising the costs of SSBs. The Federal Government should not be making a taxation decision based on caloric intake measurements.

Because the Federal Government is obsessed with obesity, in arguing for raising taxes on SSBs, the Fed’s write, “Two conditions would need to be met in order for an expanded soda tax to affect the rates of overweight and obesity. First, increased taxation would need to lead to reduced consumption of soda. Recent research suggests that soda consumption is modestly responsive to price changes. According to a recent study by Andreyeva, Long, and Brownell, an increase in soda price of 10% would decrease consumption by somewhere between 2.7% and 8.1%.11 Second, lower soda consumption would need to result in a reduction in overall caloric consumption.”

A recent study that estimated the impact of a 40% tax on all SSBs found that the tax would reduce an individual’s calories from SSBs by about 17 calories per day and calories from consumption of all beverages by 12 calories per day.


Think about that last line. If the Feds impose a FORTY PERCENT tax on soda, caloric intake would be reduced by only a few calories! How will that impact obesity? Not!

The Federal Reserve study also showed, "We also observe that SSBs represent a larger share of the spending of the poor than is true for the overall population. As a result, a soda tax would likely have a disproportionate effect on the less educated and poor groups; these groups are also more likely to benefit from the SNAP program.”

So why would it matter if a large portion of the population that drinks SSBs also receive SNAP (Supplemental Nutrition Assistance Program) benefits? Because according to the Food Security Act of 1985, a state can’t participate in the Food Stamp program if sales taxes are collected on food purchased with food stamps. So no state currently collects sales tax on soda (or any other goods) purchased with SNAP benefits.

So if people on SNAP don’t pay sales taxes on the soda, how will RAISING the sales tax deter them from drinking sugary beverages and saving 17 calories a day?

Since the sales tax will have no impact on the poorest portion of the population, and that who is government wants to deter  from drinking SSBs, and only 17 calories a day will be saved, what’s the point of the tax? I guess to raise money to be able to pay for another stupid government study.