Taxation Without Carbonation

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A recent New York Times op-ed backed a new soda tax advanced by New York Governor David Paterson as a potential cure for obesity. This proposal would tax sugary beverages to the tune of 18% and proponents argue that this approach would lead to reductions in consumption similar to cigarettes.

Let’s look more closely at the proposal. 

 


Besides raising $400 million annually for New York State’s coffers, the tax as proposed is regressive; that is, it hurts those least able to pay it. Those who can afford it will continue to purchase whatever they wish. Comparing soft drinks to tobacco is a convenient analogy, but enjoying a soft drink, or an ice cream cone, or some French fries in and of itself is not the issue.

The real problem surfaces when these popular foods and beverages morph into Weapons of Mass Consumption (WMCs). By this, I mean 64 ounce Double Big Gulps which deliver over 600 calories or 500 calorie coffee shop muffins or Monster Thickburgers weighing in at 1,420 calories apiece – before you even order the fries. When these steroidal portions collide with a consumer who can’t (or perhaps won’t) resist their temptation, waistline mayhem results.

Studies show that limiting portions can result in fewer calories consumed. Recent research by the University of Colorado – Denver determined that 120 less calories a day were eaten by those using controlled 100-calorie snack packs versus those eating out of the standard (big) box.

If the government is really sincere about fixing the obesity dilemma, it would focus less on consumers’ subsidizing their treasuries and more on how to mobilize the food companies to do the right thing AND make plenty of profits. The government should focus on setting the vision and the goals. The industry, which has the infrastructure and the knowledge, should figure out the logistics.

Unlike the auto gas crunch (where there is a scarcity of available “fuel”), we live in an era of food calorie oversupply. Therefore, government should set limits on the number of calories sold to the American public. One way to do this is to set a guideline for food companies and restaurant chains to lower calories that they sell by 10% in say 3 years.  Practically speaking, that might enable consumers to take in 50 fewer calories per day.

Looking to government to solve the obesity crisis is a mistake and this is no exception.  Virtually every program to date has proven ineffective. Nutritional labeling requirements, five-a-day fruit and vegetable programs, and food pyramid guidelines have not stemmed the tide of rising obesity rates. In fact, the rate of adult obesity has increased from 14% in 1990 to 34% in 2007. Almost 150 million American adults are now considered to be either overweight or obese. And banning trans fats, while better for heart health, does not lower calories nor reduce waistlines.

This is a much more productive way than taxation to lower calorie consumption without depriving the consumer of their favorite foods or penalizing food companies from selling their traditional cash cow brands.

The key is for government to step back and let industry figure out how it can deliver on this commitment. If the Coca-Cola Company decides to sell more Coca-Cola Zero and Vitaminwater, so be it as long as the standard is met. If McDonald’s wishes to sell its iconic Big Mac, so be it, but it might have to push its line of (highly profitable) salads and restrict total calories in their combo meals. It doesn’t matter. Just as long as the calories come down, everyone wins.

One Response to “Taxation Without Carbonation”

  1. NJM says:

    Great blog, Hank!

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