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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