By Seth Weintraub

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As of November 8, 2016, four more cities voted on, and passed, legislation taxing soda.[1] Taxation will raise the cost of soda by two cents per every ounce.[2] This legislation passes as Philadelphia’s soda tax faces its own legal challenges; namely the constitutionality of the tax.[3] Taxation on soda is not unheard of; New York’s one cent per ounce tax ended quickly in 2010.[4] These taxes bear a striking resemblance to that of a sin tax: taxing items or acts that are legal, however, viewed in the eyes of the public as morally dubious.[5] Through the taxation of soda, the words taxation and representation gather a new, more profound meaning.[6]

The government may encourage some activities, while discouraging others, through the taxation system.[7] The government of these sin tax cities rationalize these taxes by citing the United State’s drastic obesity rates[8] while also applauding the projected income the taxes will generate.[9] Almost immediately, however, big soda industries such as the American Beverage Association doubled their efforts to prevent this from occurring: since 2014, the spending on lobbying and campaigning against taxation on soda rose from $14 million to $37.7 million.[10]

As altruistic as the tax may seem, it poses a number of problems. Higher taxes on the sugary drinks incentivize tax evasion, spurring the growth of illegal black-market sales.[11] At the same time, the tax disproportionately affects lower income people over the wealthy.[12] Would legislation be better, then, by incentivizing healthier foods over punishing unhealthier foods; subsidizing healthier foods, for example?[13] With these negatives, then, is the government really looking out for the consumer, or is this just the first step in overreaching on a person’s autonomy?

To assess the effectiveness of a soda tax, economists look at sodas’ sensitivity to its price elasticity of demand.[14] Evidence shows that soda demand is reasonably elastic;[15] an increase in price, vis a vis a tax, would decrease the demand for soda.[16] As a city is a relatively limited area regarding an entire state, a tax could also influence zoning regulations.[17] The soda tax may be the gateway for legislation to tax all sugar rather than just sugary drinks.[18] By labeling soda with a negative stigma because of its lack of health benefits, a slippery slope is created to other items the public may look upon with disfavor. In a society where consumers are becoming more health conscious[19], a single molecule of sugar may become dangerous and therefore taxed.[20] As thoughtful as the tax is, the consequences are far too broad an imposition for the rapidly growing healthy consumer; as such, the government may need to find another, more appropriate means to raise revenue and fight obesity.

 

[1] Erin Schumaker, 6 Public Health Victories From The Election Night You Might Have Missed, The Huffington Post (Nov. 10, 2016), https://www.huffingtonpost.com/entry/public-health-measures-passed-during-2016-election_us_582343fae4b0aac6248898a4 (adding San Francisco, Oakland, and Albany, California as well as Boulder, Colorado to the list of cities regulating soda via taxation).

[2] See Julia Belluz, In a Devastating Blow to the Beverage Industry, 4 Cities Passed Soda Taxes, Vox (Nov. 9, 2016), https://www.vox.com/2016/11/9/13571902/soda-taxes-vote-san-francisco-oakland-boulder-albany.

[3] See generally Claudia Vargas, City Responds to Soda Tax Lawsuit, https://www.philly.com/philly/news/politics/20160923_City_responds_to_soda_tax_lawsuit.html (arguing the tax is preempted through state sales tax which applies to sweetened beverages, violating a state law requiring same-rate taxation on similar products. The city rejects this argument in its brief, arguing only distribution-level transactions, which the Pennsylvania Sales and Use Tax does not tax, will feel the weight of the tax).

[4] See J. Angelo DeSantis, Formulating a Soda Tax Fit For Consumption: A Pragmatic Approach to Implementing the Failed New York Soda Tax, 16 Mich. St. J. Med. & L. 363, 364 [hereinafter Fit for Consumption].

[5] See generally Symposium, We Are What Wetax[sic] the Semantics of Sin Tax: Politics, Morality, and Fiscal Imposition, 84 Fordham L. Rev. 2565 (alluding to other sin taxes, such as tobacco, alcohol, and speeding tickets) [hereinafter Semantics of Sin Tax].

[6] Id. at 2579 (“But here, I mean symbolic representation, underscoring that taxes can serve as a vehicle for the conveyance of collective or public meanings, not just for the deployment of purchasing power.”).

[7] See id. (listing taxation as only one option for regulation, another being outright ban, or prohibition).

[8] Overweight and Obesity Statistics, U.S. Department of Health and Human Services,

https://www.niddk.nih.gov/health-information/health-statistics/Pages/overweight-obesity-statistics.aspx (68.8 % of adults are considered to be overweight or obese).

[9] See Andrew M. Ballard, Philly Soda Tax Case Fizzles Out At Top State Court, Bloomberg BNA (Nov. 3, 2016), https://taxandaccounting.bna.com.proxy.wcl.american.edu/btac/T11200/split_display.adp?fedfid=100011062&vname=tmenot&wsn=491833000&searchid=28804242&doctypeid=13&type=date&mode=doc&split=0&scm=T11200&pg=0 (“Philadelphia’s City Council approved the tax in June to provide funding for pre-kindergarten, community schools and improvements to parks, recreation centers and libraries. The assessment, a 1.5 cent tax per ounce on sugar- and artificially sweetened soft drinks and other beverages, is expected to generate about $91 million a year.”).

[10] Belluz, supra note 2.

[11] Semantics of Sin Tax, supra note 5, at 2568.

[12] See DeSantis, supra note 4 (citing Jeremiah McWilliams, New York Soda Tax Proposal Pours a Big Glass of Controversy, Atlanta J.-Const. (Feb. 11, 2010), https://www.ajc.com/news/business/new-york-soda-tax-proposal-pours-a-big-glass-of-co/nQcTq/.

[13] See Brian Galle, Tax, Command … or Nudge?: Evaluating the New Regulation, 92 Tex. L. Rev. 837, 887 n. 268 (citing Gideon Yaniv et al., Junk-Food, Home Cooking, Physical Activity and Obesity: The Effect of the Fat Tax and the Thin Subsidy, 93 J. Pub. Econ. 823, 826-27 (2009) (articulating how subsidies for healthy foods may increase the demand for unhealthy foods through income effect) (emphasis added) (2014).

[14] Elasticity of Demand, Ag Decision Maker (July, 2007), https://www.extension.iastate.edu/agdm/wholefarm/pdf/c5-207.pdf “An elastic demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small.”

[15] See generally Soft Drink Taxes a Policy Brief, Rudd Report (2009) https://www.rwjf.org/content/dam/farm/reports/issue_briefs/2009/rwjf48503; see also Deborah L. Rhode, Obesity and Public Policy: A Roadmap for Reform, 22 Va. Soc. Pol’y & L. 491, 509 (2015).

[16] See generally https://www.rwjf.org/content/dam/farm/reports/issue_briefs/2009/rwjf48503

[17] See generally Rhode, supra note 15 at 514-15 (anticipating soda tax zoning cause-and-effects by analyzing Los Angeles’s moratorium on free-standing fast food locations in South Los Angeles).

[18] See DeSantis, supra note 4, at 397.

[19] See Elwood D. Watson, Younger Consumers Are Trending Toward More Health-Conscious Eating, The Huffington Post (Feb. 9, 2015), https://www.huffingtonpost.com/elwood-d-watson/younger-consumers-are-tre_b_6632166.html (polling that 41 % of Generation Z, those less than 20 years old, would be willing to pay more for healthier products).

[20] See DeSantis, supra note 4, at 397 (directly taxing sugar could pose an administrative nightmare, causing taxation on many more products than just sugar).

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