In January 2013, the
Massachusetts Congress moved to eliminate the state food products sales tax
exemption from candy and soda.[1]
In September 2012, the New York City Board of Health voted in favor of Mayor Michael
Bloomberg’s ban on sweetened beverages in containers larger than 16 ounces. (However,
in March 2013, the regulation was found “arbitrary and capricious” and the case
is currently in the appeals process).[2]
This paper will 1) compare the public health merits, 2) economic advantages,
and 3) personal liberties considerations of taxation versus restrictive
regulations.
Massachusetts’ Tax
Public
Health Merits
Massachusetts’
H.2634, which was introduced in January 2013 and had its latest hearing
scheduled in September, aims to remove the “essential items” state sales tax
exemption from candy and soda. The impetus of the bill is the state’s public
health concern regarding obesity. “Half of the people [in Massachusetts] are
overweight or obese,” warned the Massachusetts Health Commissioner, Dr. Lauren
Smith.[3]
Indeed, according to a 2012 report released by the Centers for Disease Control
and Prevention (CDC), 59.3% of adults and 14.3% of adolescents were overweight
in Massachusetts (23.0% and 10.9% were obese, respectively).[4]
The idea behind
tax exemption removal from candy and soda sold in the state is both to send a
message to consumers and to deter consumers from purchasing these items. With
regard to the messaging, current law defines “soft drinks” as “food products,”
and thus exempts these beverages from the Massachusetts sales tax. Supporters
of the tax argue that the exemption currently in place supports, and in part
subsidizes, these unhealthy options. With regard to the deterrence factor,
policymakers hope that highlighting these products as unhealthy, compounded
with the increased price, will dissuade consumers from purchasing candy and
soda.
Lisa Powell, a
professor of public health at the University of Illinois at Chicago said that
applying the Massachusetts state sales tax to soda would cut soft drink
consumption by 7% or 8%, based on consumption trends in the 35 states that tax
soda.[5]
Kelly D. Brownell and colleagues also explored sugar-sweetened beverage price
elasticity (consumption shifts produced by price) in a New England Journal of
Medicine article, explaining that for every 10% increase in soft drink price,
there would be a corresponding 8-10% decrease in consumption.[6]
In a separate paper, Fletcher notes, “typically imposed beverage taxes are neither
large enough nor transparent enough to lead to meaningful behavior change.”[7]
Although they may disagree on soft drink elasticity numbers,[8]
many experts believe that more tax will lead to less consumption.
In an article
published in The Journal of Public
Economics, Jason M. Fletcher and colleagues investigated the potential of
soft drink taxes to combat rising levels of child and adolescent obesity.[9]
The paper concluded that each 1% increase in the soda tax rate correlated with
a 0.003-point drop in Body Mass Index (BMI). The authors explain, “the [0].003
points is less than one thousandth of what a borderline obese person would need
to lose to become borderline normal weight.”[10]
Further, opponents of the tax argue that consumers could substitute another,
equally deleterious, tax-exempt beverage in place of soda. This “substitution”
would counter any positive health gains achieved by reducing soft drink
consumption, as consumption would shift to other equally unhealthy beverages.
Regarding the substitution
effect of the tax, the state’s move to reduce consumption of unhealthy
beverages could be undermined if Massachusetts only taxes soft drinks, but
leaves in place the exemption for fruit drinks, energy drinks, and sports
drinks. Powell explained that consumers could simply substitute other untaxed
sugary drinks for soda.[11]
If people offset soft drink intake by consuming other high-calorie beverages,
there would likely be no change in population weight and other health outcomes.
Economic
Considerations
With regard to
economic advantages of the tax, according to Healthy People / Healthy Economy,
a coalition in support of the bill, imposing the Massachusetts 6.25% state
sales tax on candy and soft drinks would generate around $53 million in revenue
for the state annually.[12]
The bill directs this revenue to the Massachusetts Department of Public Health
Wellness Fund. School districts would be eligible to apply for competitive grants
through the Wellness Fund to increase physical activity within the school day.[13]
Personal
Liberties Considerations
The “personal
freedoms” consideration adds another level of emotion and subjectivity to the
public health debate. Those who argue that the law infringes on personal
freedoms consider any tax designed to change behavior (also called a “nudge” in
some circles) to be beyond the scope of government. Opponents argue that the
move violates personal freedoms, and that individuals should be free to pick
and choose their beverage of choice without penalty. This personal freedoms
argument is validated by the fact that for those with an overall healthy diet,
little evidence shows that modest levels of soft drink consumption prove
deleterious to health outcomes.[14]
It is only when used in excess that sugary beverages are shown to increase
weight, reduce health, and thus wrack up expensive health care use (medical
costs for overweight and obesity alone are estimated to be $147 billion, or
9.1% of U.S. health care expenditures, half of which is covered by Medicare and
Medicaid).[15]
An ideal solution would, some opponents argue, dissuade consumption in excess
without penalizing consumers who eat candy and drink soda “in moderation.”
Bloomberg’s Ban
Last
September, the New York City Board of Health approved Mayor Bloomberg’s
proposed ban on sodas (not including diet sodas, beverages containing more than
70 percent fruit juice, and alcoholic drinks) larger than 16 ounces. The plans
to limit soft drink size have been stalled in the court system since New York
Supreme Court Judge Milton Tingling found the law invalid in a March 11, 2013
decision. The fate of the proposal now rests with the state’s Court of Appeals.[16]
Public
Health Merits
Mayor
Bloomberg and other supporters of the ban argue that the purpose of the ban is
to “save lives.”[17]
Indeed, 40% of public elementary school children and 58% of adults in New York
City are overweight or obese; the proportion of New York City adults who are
obese increased from 18% to 23% between 2002 and 2010.[18]
This presents a serious health concern, given that obesity is responsible for
as many as 5,800 deaths per year in the city.[19]
Economic
Considerations
The public health pros
of the ban are obvious: soda is toxic in large amounts, and fuels the growing
overweight, obesity, and diabetes epidemics. Absent from this pro list is, of
course, the benefit of increased revenue associated with imposing a beverage
tax. In addition, opponents of the ban note that the ban would hurt businesses,
arguing that it would decrease profit margins for small businesses, and would
not ultimately improve anyone’s health.[20]
Personal
Liberties Considerations
With
regard to personal liberties, the cons of the ban are similar to those
addressed in the Massachusetts tax debate discussion: many opponents find the
ban an overreaching of government into the lives of citizens and an
infringement on the personal liberties of New Yorkers.
To Ban or to Tax
Policymakers
have many options to address the looming obesity public health crisis,
including bans, taxes, other policy levers, or nothing at all. With regard to
the public health question, either of the “choice editing” strategies discussed
could inure to the benefit of the public’s health if implemented properly. Both
the tax and the ban would, in theory, curb consumption of whatever is targeted.
The levels of the tax and the contours of the ban must be studied to be sure
the desired public health result can be achieved. Considering personal
liberties, both tax and ban have the disadvantage of triggering public ire at
the government’s (ab)use of its power to tax and regulate consumption.
Regarding economics, a tax includes the attractive advantage of generating
revenue to fund state public health efforts.
In
order to orchestrate effective implementation of a public health ban or a
public tax, government would need to ensure the measure comprehensively avoided
loopholes (substitution to other unhealthy options or ways around portion
control in the case of the ban). By implementing a comprehensive measure, government
would impinge on individual freedoms, especially on the freedom of choice of
the poor, in the case of a tax.
In
evaluating taxation, the case of the taxes on cigarettes in the United States
is instructive. Tobacco taxation has been one of the most effective
population-based strategies for decreasing smoking. The U.S. Congressional
Budget Office (CBO) conducted a literature review and concluded that a 10%
increase in cigarette prices would, on average, lead youth (under age 18) to
reduce their smoking by 5-15% and adults to cut back by 3-7%.[21]
A paper published in 2012 analyzed well over 100 studies regarding the impact
of tobacco taxes on tobacco use and found that significant increases in taxes
are “a highly effective tobacco control strategy and lead to significant
improvements in public health.” The paper noted that the positive health impact
“is even greater when some of the revenues generated by tobacco tax increases
are used to support tobacco control, health promotion and/or other
health-related activities and programs.”[22]
Of course, the question of correlation and causation remains. Did use of
tobacco products decrease directly because of cigarette taxes? Or did an
increasing awareness of the harms of smoking come about at same time as
cigarette taxes?
In
conclusion, as we have seen in the case of taxes on cigarettes, implementing a
tax on candy, soda, and other unhealthy food products could successfully deter
consumers from purchasing these items in harmful and/or excessive amounts, but
the question of their effect on obesity remains. The 6.25% Massachusetts sales
tax is likely not substantial enough to produce a significant deterrent to
consumers. The more dramatic the tax, the better results the community will
see. In addition, a tax would create a pool of proceeds to further address the public
health impacts of obesity and its sequelae: diabetes, heart disease, stroke,
arthritis, and some cancers. As policymakers develop and roll out “sin taxes”
going forward, researchers must rigorously evaluate these interventions and
their repercussions. With further research, taxes and other strategies can be
developed into a comprehensive framework that effectively addresses the purchasing
behaviors and health outcomes of Massachusetts citizens and New York City
dwellers.
[1] Bill H.2634, An Act to reduce childhood obesity.
Available online at: https://malegislature.gov/Bills/188/House/H2634
[2] Wiesnerr, Daniel (Oct. 17, 2013). “New York court to
hear Bloomberg’s appeal to restore soda ban.” Reuters. Available online at: http://www.reuters.com/article/2013/10/17/us-nycsodaban-appeal-idUSBRE99G0T620131017
[3] Martha Bebinger, “Mass. Weights Governor’s Plan To
Tax Candy and Soda,” Kaiser Healht News. Available online at: http://capsules.kaiserhealthnews.org/index.php/2013/03/mass-weighs-governors-plan-to-tax-candy-and-soda/
[4] “Overweight and Obesity – Massachusetts: State
Nutrition, Physical Activity, and Obesity Profile,” Centers for Disease
Control. Available online at:
http://www.cdc.gov/obesity/stateprograms/fundedstates/pdf/massachusetts-state-profile.pdf
[5] Martha Bebinger, “Mass. Weights Governor’s Plan To
Tax Candy and Soda,” Kaiser Healht News. Available online at: http://capsules.kaiserhealthnews.org/index.php/2013/03/mass-weighs-governors-plan-to-tax-candy-and-soda/
[6] Kelly D. Brownell et al., “The Public Healht and
Economic Benefits of Taxing Sugar-Sweetened Beverages,” NEJM. Available online
at: http://www.nejm.org/doi/full/10.1056/NEJMhpr0905723
[7] Jason M. Fletcher, et al. “Taxing Soft Drinks and
Restricting Access to Vending Machines to Curb Child Obesity,” Health Affairs.
Available online at: http://content.healthaffairs.org/content/29/5/1059.full
[8] Roland Sturm et al. “Soda Taxes, Soft Drink
Consumption, and Children’s Body Mass Index.” Health Affairs. Available online at: http://content.healthaffairs.org/content/early/2010/04/01/hlthaff.2009.0061.full
[9] Jason M. Fletcher, et al. “The effects of soft drink
taxes on child and adolescent consumption and weight outcomes.” Journal of
Public Economics. Available online at: http://medicine.yale.edu/labs/fletcher/www/soda.pdf
[10] Sarah Kliff, “Why ban soda when you can tax it?”
Washington Post. Available online at: http://www.washingtonpost.com/blogs/wonkblog/post/why-ban-soda-when-you-can-tax-it/2012/06/01/gJQAT27E7U_blog.html
[11] Martha Bebinger, “Mass. Weights Governor’s Plan To
Tax Candy and Soda,” Kaiser Health News. Available online at: http://capsules.kaiserhealthnews.org/index.php/2013/03/mass-weighs-governors-plan-to-tax-candy-and-soda/
[12] “House Bill 2634: An Act to Reduce Childhood Obesity,
sponsored by Rep. Kay Khan,” Healthy People / Healthy Economy. Available online
at: http://bostonfoundation.org/subsites/content.aspx?ID=18728
[13] “House Bill 2634: An Act to Reduce Childhood Obesity,
sponsored by Rep. Kay Khan,” Healthy People / Healthy Economy. Available online
at: http://bostonfoundation.org/subsites/content.aspx?ID=18728
[14] Jason M. Fletcher, et al. “Taxing Soft Drinks and
Restricting Access to Vending Machines to Curb Child Obesity,” Health Affairs.
Available online at: http://content.healthaffairs.org/content/29/5/1059.full
[15] Kelly D. Brownell et al., “The Public Health and
Economic Benefits of Taxing Sugar-Sweetened Beverages,” NEJM. Available online
at: http://www.nejm.org/doi/full/10.1056/NEJMhpr0905723
[16] Michael M. Grynbaum, “New York Soda Ban to Go Before
State’s Top Court,” The New York Times. Available online at: http://www.nytimes.com/2013/10/18/nyregion/new-york-soda-ban-to-go-before-states-top-court.html
[17] Daniel Wiessner, “New York court to hear Bloomberg’s
appeal to restore soda ban,” Reuters. Available online at:
http://www.reuters.com/article/2013/10/17/us-nycsodaban-appeal-idUSBRE99G0T620131017
[18] Susan Kansagra, “Maximum Size for Sugary Drinks:
Proposed Amendment of Article 81,” New York City Department of Health and
Mental Hygiene. Available online at: http://www.nyc.gov/html/doh/downloads/pdf/boh/max_size_sugary_drinks_BOH.pdf
[19] Susan Kansagra, “Maximum Size for Sugary Drinks:
Proposed Amendment of Article 81,” New York City Department of Health and
Mental Hygiene. Available online at: http://www.nyc.gov/html/doh/downloads/pdf/boh/max_size_sugary_drinks_BOH.pdf
[20] Douglas Stanglin, “NYC hears pros, cons on banning
large sugary drinks.” USA Today. Available online at: http://content.usatoday.com/communities/ondeadline/post/2012/07/nyc-holds-hearing-today-on-banning-large-sugary-drinks/1#.UqItd426kzc
[21] Chuck Marr et al. “Higher Tobacco Taxes Can Improve
Health and Raise Revenue,” Center on Budget and Policy Priorities. http://www.cbpp.org/cms/?fa=view&id=3978#_ftn7
[22] Frank J. Chaloupka et al., “Tobacco taxes as a
tobacco control strategy,” Tob Control. Available online at: http://tobaccocontrol.bmj.com/content/21/2/172.full
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