Proposed soda taxes in two California communities may turn out to be more sour than sweet, according to one report.
The tax initiatives, which are on the ballot in Richmond and El Monte, have been touted as necessary measures to reduce obesity and increase revenue for the local governments.
A recent study by the Tax Foundation disputed the effectiveness of the initiatives, however, and concluded that “sin” taxes “disproportionately harm low-income individuals.”
Soda would be taxed at one cent per ounce. A 24-pack of soda would subsequently be taxed $2.88. The tax is imposed on the merchants as a business license fee, rather than a direct tax on each soda purchase.
“This rate is larger than any beer excise tax in the U.S., the highest of which is $1.07 per gallon in Alaska. Only twelve states tax wine at a higher rate than the proposed local soda tax rate, with California consumers paying a 20 cent per gallon tax and the median state taxing it at 72 cents per gallon,” the Tax Foundation reported.
The Tax Foundation also determined that this type of tax does not effectively motivate people to change their behavior and would therefore lead, at best, only to a minimal impact on the obesity epidemic. In fact, the foundation cited a study by Cornell University that found that increases in soda taxes actually lead to higher beer consumption.
“A 2012 study … showed that for households prone to buying alcohol, there was a 172.4 ounce increase in beer consumption per month when a 10 percent tax was applied to soda, which equated to a heightened intake of 1930 calories in the same time frame,” the report stated. “This raises concerns about potentially switching one public health problem for another.”
Merchants could spread the costs of the business license fee across their inventories, rather than raise soda prices exclusively.
It’s not clear that either of these initiatives will pass. Soda companies spend millions of dollars against such proposals and have a near-perfect record for defeating these types of taxes.
According to Reuters, the American Beverage Association has flexed its muscles in both races, funding $153,628 to Richmond’s Community Coalition Against Beverage Taxes between June and September, and backing a lawsuit in El Monte challenging the ballot language as “clearly biased, misleading and false.”
The Tax Foundation maintains the “tax code is far too blunt an instrument to address such an important public health issue,” emphasizing that diet choices are based on individual preferences.
The group’s study did not evaluate either the revenue impact of the proposed measures or the efficacy of any anti-obesity programs they may fund.
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