Facing budget shortfalls in the upcoming fiscal year, several state and city legislatures are reportedly considering a tax on sugar-sweetened beverages. Kansas Senator John Vratil (R-Leawood) this week proposed a bill (S.B. 567) that would tax such products, including energy and sports drinks, at the rate of one penny per teaspoon of sugar. According to its proponents, the measure would add a dime to the cost of a typical 12-ounce soft drink and raise approximately $90 million per year. “The thinking is No. 1, we need money,” Vratil was quoted as saying. “But perhaps just as importantly, obesity is a real, growing problem.” See The Kansas City Star, March 9, 2010.

In addition, Philadelphia Mayor Michael Nutter has introduced a FY 2010-11 budget that includes a 2-cent-per-ounce tax on the distribution of sugary drinks. Media sources have apparently likened the measure to current excise taxes or the 10 percent “liquor-by-the-drink” tax. “Multiple studies have demonstrated a link between sugar-sweetened beverages and obesity, and if the costs are fully passed on to consumers, consumption is expected to decrease,” states Nutter’s proposal, which estimates that the levy will raise $38.6 million annually for city coffers. See Philly.com, March 3, 2010.

Meanwhile, New York Governor David Paterson (D) has reiterated the plan outlined in his proposed FY 2010-11 Executive Budget to raise $650 million by “imposing a syrup excise tax on unhealthy beverages.” According to news sources, the proposal faces opposition but could pass because the legislature must reject the entire budget to kill the tax. “It’s not a separate bill that can just be left to die,” wrote Monica Potts, an associate editor for The American Prospect magazine on March 11, 2010. “Lawmakers would have to come up with alternative revenues or cuts to offset the loss if the proposal is jettisoned—a tough proposition given the existing $9 billion budget gap.” See Crain’s New York Business, March 9, 2010.

Speaking at a March 8, 2010, symposium sponsored by the New York Academy of Medicine and other state health groups, Paterson also cited the “$7.6 billion the state spends every year to treat disease from obesity.” His appeal has since been echoed by New York City Mayor Michael Bloomberg, who urged legislators to adopt a 1-cent-per-ounce tax. “An extra 12 cents on a can of soda would raise nearly $1 billion, allowing us to keep community health services open and teachers in the classroom. And, at the same time, it would help us fight a major problem plaguing our children: obesity,” opined Bloomberg on his weekly radio program. See The New York Times, March 7, 2010; Reuters and The New York Times, March 8, 2010.

These initiatives, however, have drawn criticism from industry proponents who warn that the tariffs will negatively affect consumers and businesses without reducing obesity rates. In particular, the American Beverage Association (ABA) has warned that the Philadelphia measure “will threaten 2,000 well-paying beverage industry jobs” in the area, as well as hurt local grocers “by driving sales outside the city limits.” Moreover, as one ABA spokesperson argued, “Singling out soft drinks and other foods for taxation in order to reduce obesity won’t solve this public health problem and could lead to unintended consequences, especially for lower and middle income Americans.”

ABA has specifically criticized a recent study claiming that local, state and federal taxes on soft drinks and pizza “may be effective mechanisms to steer U.S. adults toward a more healthful diet and help reduce long-term weight gain or insulin levels over time.” Kiyah Duffey, et al., “Food Price and Diet and Health Outcomes: 20 Years of the CARDIA Study,” Annals of Internal Medicine, March 2010. Researchers apparently relied on dietary information supplied by 5,115 participants in the 20-year Coronary Artery Risk Development in Young Adults (CARDIA) study. Although the study only “examined a small handful of 11 foods and beverages,” according to ABA, it nevertheless concluded that an 18 percent tax on soda and pizza could lead to an average annual weight loss of five pounds per person. A concurrent editorial also noted that revenues from these surcharges could be used to promote health education and awareness initiatives. “Copying a successful tactic of anti-tobacco crusaders, the funds could also be used to counter the lavish advertising of soda and junk food or for ‘marketing’ ordinary tap water,” wrote the editorial authors. See ABA Press Releases, March 4 and 8, 2010; Los Angeles Times and Reuters, March 8, 2010.