In the past four decades, U.S. obesity rates have doubled and a third of the population in 49 out of the 50 states is obese. Considered a public health catastrophe, obesity is slowly killing Americans and imposing a substantial, $190 billion (nearly 21 percent of total health care spending) economic burden on society. Greater consumption of sugary drinks is a major driver of this increase in obesity and related health problems, as 50 percent of our fellow Americans drink a soda a day. Putting this in perspective, 1 can of Coke contains 39 grams of sugar -- 56 percent more than the recommended daily sugar allowance for the average adult. Intervention is necessary to curb what is already an obesity-led public health crisis that will only get worse.
Medical research links the intake of sugary-beverages with obesity and its numerous side effects including Type 2 diabetes, coronary heart disease, and respiratory problems. Greater consumption of sugar increases health risks for the individual, but also increases the economic and societal costs associated with these health issues. One 2009 study found that 9 percent of total health care expenditure was directed towards obese individuals, with 8.5 percent and 11.8 percent of this spending funded through Medicare and Medicaid respectively. According to a study by the American Heart Association, obesity-related health care costs will reach $344 billion by 2018 and comprise 21 percent of the country's health care spending. All Americans, regardless of their sugary-beverage consumption, are fronting the costs of obesity-related diseases through their taxes and higher insurance premiums.
The prices of sugary drinks do not account for this additional cost faced by society, driving demand higher than the socially optimal level. Taxes can correct for this unaccounted cost. Typically, taxes on goods and services lead to higher prices and less consumption than what is socially desired. But in the case of empty-calorie beverages, current prices do not reflect the true cost on society of the good's consumption. By taxing sugary beverages, price sensitive customers are likely to substitute their soda with less sugary-alternatives, hopefully leading to less obesity and lower medical costs.
Opponents of a soda tax argue that it is regressive. Low-income Americans spend a larger portion of their salaries on groceries -- a tax on sweet drinks would have a bigger negative impact on them, if they choose to continue consuming these drinks. But the price of sodas has remained almost the same since 1970s; the Bureau of Labor Statistics finds that adjusting for inflation, soda prices have fallen by 34 percent since the 1970s. This is more than almost any other food or beverage item. Effects of a soda tax may be felt differentially by various socioeconomic groups, but would help curb obesity and reduce government spending on healthcare and costs for all. The benefits of a soda tax far outweigh the slightly higher marginal cost imposed on the low-income.
Then there are those who appeal to notions of personal liberty. The government has no right telling Americans what they ought not to eat or drink, and taxing sugary beverages is yet another example of a big paternalistic government crossing the line between state rights and individual rights.
But a soda tax is not a ban on sugary beverages. It's simply a more comprehensive reflection of the full costs individuals and society bear due to excess consumption. As with the consumption of any good that has detrimental effects on the individual and society, corrective taxes can discourage consumption of the good and help pay for its societal costs.
Forty-six years ago, all U.S. states had taxes on cigarettes. The idea being, cigarettes were bad for individuals and society. Without the government to regulate cigarette smoking, the health and well-being of Americans would be compromised. Today, research conducted at George Washington University finds that obese women spend $4,879 and obese men spend $2,646 annually to cover the direct and indirect costs of being overweight. These costs don't even measure the health risks and social stigma obese individuals must live with on a daily basis. We must give up some of our individual liberties to live in a healthy society. We did so for cigarettes; now is the time to do so for soda consumption.
Cities including New York have tried to pass taxes on soda, but these efforts have not been without uproar. According to the Center for Science in the Public Interest, lobbyist groups from Coca-Cola, PepsiCo, and the American Beverage Association have collectively spent $70 million on anti-soda tax propaganda. Time and again, legislation to pass soda taxes has cropped up on state and national levels. Most recently, Democratic Assemblyman Richard Bloom introduced a bill to impose a two-cent-per-ounce tax on sugary beverages in California, only to have it rejected.
Perhaps the most salient objection is that a soda tax simply won't work. Instead, Americans need educational campaigns and consultations with doctors and dieticians are the solution. While these are valid suggestions, coupling education with taxation can bring quicker change and also finance reform campaigns as well as the health care costs of obesity already borne by Medicare and Medicaid. Estimated revenues for a national 1-cent-per-ounce tax would amount to over $16 billion. We need to summon the political will to take actions to curb the health care costs of our overconsumption of sugar.