DC should reverse course on soda tax
The D.C. Council, which implemented a 2 percent tax on sodas and other sugary drinks in October and is now considering an even higher rate of 1.5 cents-per-ounce, seems determined to make the nation’s capital — already one of the most expensive cities in the country — even less affordable for its residents and more hostile to job creators.
The proposed excise tax would raise the price of a two-liter soda or a 6-pack of energy drinks by more than $1 — more than a 50 percent price hike, in some cases. The average consumer could expect to pay $75 in additional taxes every year, totaling $300 for a family of four. That might be a mild expense for members of the D.C. Council, but it’s a significant burden for the more than 182,000 low-income D.C. residents struggling to pay their bills. Make no mistake: Poor people are punished by these taxes.
Theoretically, taxing sugary drinks is supposed to curb sales and prod consumers into making healthier choices. But as other cities around the country have discovered, these taxes carry a host of unintended consequences. Philadelphia’s soda tax, for example, led to grocery store closures all over the city as residents started shopping in nearby jurisdictions to avoid the tax. There’s even evidence that by making soft drinks relatively more expensive, the tax led to higher alcohol sales. Less than a year after its adoption, Philadelphia’s tax had destroyed an estimated 1,192 jobs and led to a reduction of $55 million in labor income.
And while advocates of soda taxes couch their policies as common-sense public health measures, many health experts aren’t convinced. Micromanaging people’s diets through the legislative process has a poor track record of success, as Denmark discovered soon after adopting a tax on saturated fat in 2011. When officials realized that most Danes merely switched to cheaper brands or crossed over to Sweden or Germany to escape the tax and that 7 in 10 voters opposed the policy, it was quickly abandoned.
Other countries have come to similar conclusions. In 2017, after a review of the evidence, the New Zealand Ministry of Health stated that “studies using sound methods report reductions in [sugar] intake that are likely too small to generate health benefits and could easily be canceled out by substitution of other sources of sugar or calories.” Moreover, “no study based on actual experience with sugar taxes has identified an impact on health outcomes.”
Last year, researchers at the Children’s Nutrition Research Center at Baylor College of Medicine found that “the evidence supporting [a] relationship between SSB [sugar-sweetened beverage] consumption and child body mass index (BMI) is consistently small and lacks causality” and that “taxation has no clear relationship to SSB purchasing.”
Indeed, a newly-released study from the National Bureau of Economic Research looked at four cities that have implemented taxes on sugary beverages — San Francisco, Seattle, Oakland, and Philadelphia — and could only detect declines in sugary beverage consumption in Philadelphia, where the tax is estimated to reduce consumption by an average of 5 calories per day per person — essentially a rounding error in most people’s diets.
In targeting sugary drinks, policymakers send misleading messages about how to adopt a healthy diet. Sugar-sweetened beverages account for only about 4 percent of the average American’s daily calorie intake, a figure that has been declining for the last quarter-century. The fact that obesity steadily increased during that period demonstrates that policymakers’ fixation on sugary drinks is misplaced.
Politicians seeking to punish consumers for buying sugary drinks have seized upon a convenient scapegoat, but they have ignored principles of sound tax policy. The D.C. Council should learn the lessons of the past.
Liam Sigaud writes for the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org.