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fat-tax

More on Health Care Reform: Congress Apparently Sweet on Soda Tax

July 28, 2009 · 10 comments

Though the health care reform bill has officially been tabled until after the break, there is still work to do in Congress before a vote can be scheduled. At the top of the list? Find a way to pay for the bill.

The Senate Finance Committee has considered a number of funding options but nothing seems to generate the right balance of Congressional and, more importantly, taxpayer support. But they keep trying.

If only they could think of something to tax that could be spun as promoting health…

Yes, you guessed it. The so-called “soda tax” is now back in the picture.

The soda tax (which failed when proposed in New York) has been proposed in the House and Senate as a potential revenue generator to pay for health care reform. The tax would be a 3 cent surtax on soda, energy drinks and “other” sugary drinks (various proposals have included taxing, for example, certain kinds of juices). The Congressional Budget Office estimates that the increase would generate $24 billion over the next four years. If you’re doing the math, that works out to 200,000,000,000 drinks per year (or 800,000,000,000 over four years). Yeah, we in America love our sugary drinks.

And it’s clearly what’s making us fat. At least that’s what Congress is hoping we’ll believe. The bill to tax these drinks is being pitched as part of a strategy to help Americans “lower consumption of sugary drinks” and therefore, improve your overall health.

The argument has some weight (*clears throat*) behind it. A New England Journal of Medicine article published in April argued that sugary drinks “may be the single largest driver of the obesity epidemic.” The article goes on to say that “interventional studies show that reduced intake of soft drinks improves health.”

So, the theory goes, soft drinks are “bad” and raising taxes on them would be “good.” The revenue from the tax would help pay for obesity-related health spending, which reached $147 billion last year. In fact, research shows medical spending averages $1,400 more a year for an obese person than for someone whose weight is considered to be normal. Keep in mind, though, that those numbers include spending on diabetes and heart disease, which are considered to be “more common” in obese persons but not always connected to weight.

Basing their research on increases in taxes on tobacco products, scientists at Yale believe that higher prices for soda would result in reduced consumption. Estimates vary as to the actual drop in demand, but the initial research suggests that for every 10% increase in price, consumption would decrease by 7.8%. Those that stop drinking soda and sugary drinks would then switch to healthier drinks, which would result in less weight gain and therefore, fewer health problems (and costs).

Voila! Problem solved!

Only maybe it’s not so black and white.

Statistically, it is the poorest Americans who are continuing to pack on the pounds. Research suggests that while rates of obese adults are leveling off for some, the rate is not decreasing for poorer Americans. A tax increase would hit those Americans the hardest – but would it change behaviors?

Maybe not.

In 2008, the New York Times reported that food and beverages made up about 15 percent of the average person’s spending. Spending on soda represented about .3% of a person’s overall budget in 2008, statistically, fairly insignificant. And while the cost for soda remains relatively low, the cost of many healthy foods increased last year; the cost of eggs, for example, increased at a rate of more than 15 times that of soda. In 2009, the price index for fruits and vegetables increased more quickly than that for soft drinks or sweets (Source: Bureau of Labor Statistics). In other words, eating healthy is expensive (nothing new there) and making it more expensive to consume less healthy treats won’t necessarily make people more healthy. It may just make people more poor.

The American Beverage Association, agrees (no surprise there). They have consistently argued that the tax would affect poor Americans the most. In response to the ramped up rhetoric on the tax, the association has formed a coalition called Americans Against Food Taxes in opposition to the tax. The coalition claims that education, not taxation, is the answer to America’s obesity problem. They cite studies which indicate that “the sensitivity of individuals to changes in relative food prices is not sufficient to make ‘fat taxes’ a viable tool to lower obesity.” In other words, they argue that taxing soft drinks won’t make us more healthy.

So which is it? Will a soda tax fit society’s ills? Or at least put a dent in it? I’m not convinced that it will.

Besides, if you believe Coca Cola, you can’t tax soda! It brings both Democrats and Republicans together, remember?

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“Fat Tax” On the Scene Again – This Time, In the Senate

May 13, 2009 · 10 comments

Argh. Can our debate on health care and taxes get any worse at this point?

After New York tried – and failed – to tax sugary soft drinks as part of a so-called “fat tax”, you’d think the matter would be put to rest. But that’s far from how our Senate works. If it doesn’t work, let’s, er, try it?

It should come as no surprise, then, that the Wall Street Journal is reporting that the Senate is considering such a tax at the national level to help pay for health care reform. You’ve got to be kidding.

First of all, I believe that we need health care reform. No child, no family should be without proper medical services in the richest country in the world. I don’t think we do it through taxes. How about, oh, I don’t know, revoking the tax exempt status of insurers instead? But I digress.

The party line is that a tax on these beverages might suppress usage and suddenly make us all incredibly healthy. But really, what makes sugary sodas any worse than chocolate? Or potato chips? Or any of that fairly questionable food that you can get at a fast food restaurant?

And it’s not just soda that might be taxed. The Senate is considering proposals to tax all “sugary beverages” which would include traditional sodas like Coca Cola but also drinks like Gatorade and Capri Sun.

You and I know that it’s all about money. The Congressional Budget Office estimates that a tax on these drinks could raise about $24 billion over four years. A lot of money. But only a drop in the giant bucket that is our deficit.

Of course, the American Beverage Association is fighting the proposed tax. Studies have shown that increasing the tax will likely decrease consumption – something that the industry doesn’t want. It’s a fairly powerful lobby so passing such a tax won’t be a small feat.

And I’ll come clean: I don’t drink sugary drinks. I’m a coffee (black, no cream, what are you – nuts?) and Diet Coke kind of girl. My kids do not drink soft drinks of any kind or Kool Aid. They drink milk, water and juice (yes, sugary but not added sugar). So such a tax wouldn’t affect me. But man, is it a slippery slope. When does the Senate decide that taxing sugary soft drinks aren’t enough? When do we slap a national tax on coffee or orange juice? Or milk?

Tax has always been used to modify behavior (think about why you own your home, rather than rent). But these days, it feels like it’s going too far. What do you think?

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Governor Paterson Not Sweet on Soda: Fat Tax Proposal

December 20, 2008 · 5 comments

Following in the footsteps of Alabama and countries like the UK, the state of New York is considering imposing a so-called “fat tax.” While each municipality is a little different, the New York proposal would slap an 18% tax on sodas and sugar-filled drinks which contain less than 70% real fruit juice.

The official position on the “fat tax” is to discourage consumption of high-caloried drinks. The government projects a 5% drop in the number of sugary drinks that New Yorkers drink.

But you and I know what this is really about: money.

While sin taxes have been imposed or proposed on a number of items that are said to be bad for you – cigarettes, alcohol and in some states, porn – ostensibly to curb the behavior, these taxes have generally not resulted in dramatic changes. Folks still smoke, drink and yep, look at porn.

What Governor Paterson is really hoping to do is close a gaping hole in the budget: according to the Governor, the new tax will raise almost half a billion dollars in 2010-2011. In a tight economy, taxpayers will howl at the idea of raising personal or property taxes. Taxpayers are far less vocal about a tax on items that health officials have already labeled as bad for you.

Not surprisingly, the American Beverage Association opposes the tax, arguing that it doesn’t make sense to target sodas and sugary drinks as a primary cause for obesity. I would actually agree. If you’re going to make a policy statement about health, then make it across the board. Of course, that would never fly. Can you even imagine a surtax on chocolate?

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Alabama Imposes “Fat Tax”

October 28, 2008 · 13 comments

Just one week after I published my primer on Alabama state taxes, an article was posted on TheRoot.com touting a new tax in Alabama: the fat tax.

It’s not as literal as it sounds. The Alabama State Employees’ Insurance Board has approved a plan which requires state workers to pay up if they don’t utilize free health screenings. The program, which will take effect in 2010, requires state workers to participate in a free health screening for cholesterol, glucose levels, blood pressure and body mass index (BMI). Workers who refuse to participate will pay a $25 monthly surcharge, which the state claims will be used to offset higher insurance premiums for unhealthy workers.

In 2011, Alabama state workers will have to take steps to reduce high risk behaviors as determined by the health screenings. The Wall Street Journal reports that state workers who are diagnosed with certain health conditions would have three options: seek free medical advice; enroll in a state-sponsored wellness program or take steps that lead to improved results at the next screening later that year. State workers which refuse to participate will be charged $25/month starting January 2011.

Opponents claim that these requirements are discriminatory and egregious. But Alabama points towards a similar program from three years ago that required state workers who smoke to pay $24/month to supplement the cost of health insurance as a success.

Further, the state argues that some intervention is required. Alabama has a death rate that far exceeds the national average. Additionally, the state exceeds the national average in cases of obesity and heart disease (according to the CDC); in fact, according to the CDC, nearly 2 in 3 Alabama adults residents are obese, the fifth highest rate in the country.

As the numbers of unhealthy residents climb – along with the spiraling costs of health care – Alabama is clearly willing to try new ideas to keep health risks and costs down. But is that the place of the government? Proponents say yes. Tax policy has been used to curb all manner of behaviors including under-age drinking, snacking and porn. These taxes, sometimes called “sin taxes” are meant to change your behavior.

Does it work? The jury is still out. Those in favor say yes, while critics claim such taxes are merely revenue raisers. What is true is that these taxes and surcharges get a lot of publicity… When the Philadelphia Inquirer ran an ad campaign claiming higher fares for fat people, the reactions were swift and loud – on both sides.

Are taxes like these fair or discriminatory? Is it the place of the government to curb perceived “bad behaviors”? Does it change the equation when the government bears the costs of the perceived “bad behaviors”? Tell me what you think!

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Fat? It’s Gonna Cost You.

13 July 2007

Well, only if you live in the UK.
Our friends across the pond at Oxford University claim that charging VAT (Value Added Tax, sort of like a sales tax) of 17.5% on foods deemed to be unhealthy would reduce the number of heart attacks and strokes. The theory is that increased costs will slash consumer [...]

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