Posted by Earlier this month, the DC City Council passed the Healthy Schools Act, which will raise nutritional standards for school meals, increase the amount of physical and health education students receive, create school gardens, and do all kinds of other commendable things. The difficult part is that it’ll cost $6.5 million annually, and we’re in the middle of a budget crunch.
Councilmember Mary Cheh has proposed a funding mechanism that has the potential to not only raise money but to fight obesity at the same time: a one-cent-per-ounce excise tax on sugar-sweetened beverages. (The beverages are non-alcoholic ones containing “caloric sweeteners,” and the definition excludes milk products and beverages that contain more than 70% juice by volume; draft legislation is here.) The first $6.5 million raised each year will fund implementation of the Healthy Schools Act, and funds beyond that will go to the Healthy Food Access Initiative, the Healthy Corner Store Program, and other worthy-sounding projects. The rationale for this kind of tax is pretty solid.
Taxing a product is often a good way to get people to buy less of it — for instance, jacking up tobacco taxes has helped reduce smoking. The money raised by such a tax can also be used to offset the toll of the related behavior. The millions of vehicles driving in the US take a toll on our roadways, so we tax gasoline to fill the Highway Trust Fund that pays for roadwork (or much of it, anyway). Sweetened beverages contribute to obesity, and this tax would fund efforts aimed at decreasing obesity.
Effects on Obesity
How much would the tax affect obesity rates? In a 2009 New England Journal of Medicine article, Brownell et al estimate “an excise tax of 1 cent per ounce would lead to a minimum reduction of 10% in calorie consumption from sweetened beverages … a reduction that is sufficient for weight loss and reduction in risk.” They base this estimate on research into price elasticity (how much demand will change with a change in price), and assume that in some cases people will substitute other forms of calories for sweetened beverages they don’t drink.
In a recent study published in Health Affairs, Sturm et al combine data from the Early Childhood Longitudinal Study – Kindergarten Cohort with information on soda tax rates in different states. Several states already tax soda at higher rates than they do other food or beverage items, with the average differential being 3.5%. The results of their analysis suggest that these relatively small taxes are unlikely to measurably affect children’s soda consumption overall — but they may affect consumption by subgroups who are at particular risk for obesity, including children in low-income families.
A one-cent-per-ounce tax will raise the price of sweetened beverages more than existing state soda taxes already do — between 10-20%, depending on the original price. (If a 12-ounce can of a sweetened beverage originally cost $1, its price will rise to $1.12, a 12% increase. If a one-liter bottle originally cost $1.69, its price will rise to $2.03, a 20% increase.) Sturm et al estimate that an 18% differential soda tax would correspond with a 20% reduction in excess BMI gain. “No other anti-obesity policy has demonstrated a reduction of that magnitude yet,” they note.
So, Should We Do It?
The price increase under consideration is pretty large in percentage terms, but it’s still just 12 cents for a can of soda or 34 cents for a one-liter bottle. Many soda buyers won’t notice the difference, but low-income soda consumers will. Obesity rates are highest in DC’s poorest neighborhoods — in Wards 7 and 8, which have the lowest median incomes, 40% and 42% of residents (respectively) are obese — so it’s arguable that the poorest residents most need to feel the effect of the tax and change their purchasing habits accordingly.
I’m not entirely comfortable with the idea that we can implement a policy that will shape poor people’s behavior just because they’re poor. (Of course, many of our policies end up having that effect, but that’s usually not their intent.) I’d much rather see us change the things that allow sweetened beverages to be so cheap in the first place, like the billions of dollars in subsidies for corn (and, by extension, corn syrup) and the tax breaks for advertising. However, I suspect that beverage companies could lose these subsidies and still keep their prices close to what they are today — and they’d might well decide to do just that in order to preserve their market share.
What I’d really like to see is for our country to address obesity by promoting health in a comprehensive way: Make healthier foods more affordable; improve health education; shift from car dependence to more walking, biking, and public transportation; and make it easier and safer for people to exercise in their communities. Policies to move us in this direction will require massive amounts of time, money, and other resources, though.
In the end, I have to support DC’s soda tax proposal because it’s likely to be effective and because we can implement it quickly. What do you think?
May 17, 2010
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