Sugary Drinks Taxes Produce Undesirable Side Effects

Published Thursday, June 8, 2017

The Seattle City Council this week enacted a 1.75 cents per ounce tax on sugary drinks, the second-highest tax among U.S. cities - including a handful in California - that have chosen to use taxation as a weight to change consumers beverage-consumption patterns. The tax takes effect next year. Progressive ideas implemented in Seattle and California usually make their way to Oregon, and an effort already is under way to put a sugary drinks tax on the ballot in Multnomah County.

None of this is very surprising. Local and state governments across the nation are looking for ways to raise revenues to offset growing health care and pension costs, among other expenses. At the same time, interest in promoting healthy lifestyles is growing among individuals and communities. So, why not put a tax on sugary drinks - raising revenue and discouraging consumption of unhealthy products at the same time?

Anyone tempted to follow that logic, should look at what happened in Howard County, Maryland. The Journal of American Medicine studied a three-year campaign in the Maryland county. Officials used advertisements, product enticements and other non-coercive methods to encourage consumers to choose healthier drinks. The results: Soft drink sales dropped about 20% and sales of sugary fruit juices dropped about 15%. Some cities with beverage taxes - most notably, Philadelphia, Pennsylvania - have reported bigger decreases in consumption, but the Howard County results are similar to those reported in West Coast cities that have enacted taxes.

Positive enticements such as those offered in Maryland also reduce the negative economic consequences of beverage taxes. Taxes on sugary drinks are regressive because they disproportionately affect low-income households. Similarly, some of the hardest hit businesses would be small stores and restaurants that sell affected beverages.

The most popular taxes always are ones that other people pay. If you consume relatively few sugary drinks, this tax might sound harmless. But, that doesn't make the proposed ballot initiative a good idea if it raises taxes on those who can afford it least, harms smalls businesses and offers no assurance of improved public health.

For more information on the proposed Multnomah County sugary drink tax, click here.