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Soft drink tax could save money, says NYC health commissioner

By Caroline Scott-Thomas , 09-Apr-2009

Taxes on sugary soft drinks could actually save taxpayer money through improved health, according to a journal article penned by the New York City health commissioner and a Yale University professor.

New York State Governor David Paterson abandoned a controversial 18 percent so-called ‘fat tax’ on non-diet soft drinks last month, bowing to pressure from consumers and industry groups.

Despite this, Kelly Brownell and Thomas Frieden argue in the latest issue of the New England Journal of Medicine that taxing non-diet soft drinks would lower consumption and produce savings in health care provision that would more than offset the taxes themselves.

According to a recent study of changing beverage consumption published in the American Journal of Preventative Medicine, American children consumed more sugared beverages than milk for the first time in the mid-90s and beverages now account for 10 to 15 percent of calories consumed by children and adolescents, figures cited in the NEJM article.

Tax per ounce

Frieden, health commissioner for the City of New York, and Brownell, professor and director of the Rudd Center for Food Policy and Obesity at Yale University, wrote: “A penny-per-ounce excise tax could reduce consumption of sugared beverages more than ten percent. It is difficult to imagine producing behavior change of this magnitude through education alone, even if government devoted massive resources to the task.”

They also criticized sales taxes that work as a proportion of price rather than per unit, saying that they simply encourage consumers to choose less expensive brands or larger containers. New York’s dropped tax would have worked in this way, as a proportion of price.

Individual freedom?

Although there has been huge opposition to the idea of government intervention of this kind, with many arguing in defense of personal freedom of choice, the authors put forward three retaliations to this position.

Firstly, they wrote about the ‘externality’ of obesity-related costs. The annual US cost of health care for obesity-related diseases is estimated at $79bn. Of that, half is met by Medicare or Medicaid, therefore costing all taxpayers, whether or not they choose to eat a healthy diet, they argued.

Secondly, they said that the transaction is ‘asymmetrical’, with marketers using “techniques that exploit the cognitive vulnerabilities of young children.”

And thirdly, they argue that a soft drink tax makes sense in terms of raising revenue during a recession, claiming that a penny per ounce tax would raise $1.2bn in New York State alone. Governor Paterson’s tax was expected to raise $404m in tax revenue in 2009-2010.

They also claimed that levels of opposition to the tax varied depending on how it was framed.

“A poll of New York residents found that 52 percent supported a ‘soda tax’,” they wrote. “But the number rose to 72 percent when respondents were told that the revenue would be used for obesity prevention.”

The American Beverage Association has dubbed the proposed New York tax as “sweeping” and “regressive” and said it was an attack on ordinary, hardworking Americans.

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