Monday, February 8, 2010

Health and the Soda Tax Fizzle

Fast increasing overall health care costs in the country, regardless of what happens to pending legislation in the Congress this year, will lead to higher insurance company premiums, higher individual co-pays and deductibles, and/or higher corporate and personal income taxes. There are many reasons for the increasing health care costs, including growth in our senior population requiring more care, lack of health care tort reform, and strong lobbying by the health care industry. Another big factor is the growth in the percentage of our population that is overweight or obese.

According to a number of credible sources, as many as one out of three of our children are now overweight or obese, and a similar ratio applies to adults! It is also of great concern that a majority of these overweight or obese people seem to be in lower income families who can least afford to pay for the substantial expenses associated with treating these weight conditions, especially such as diabetes and heart disease. Medical costs related to obesity in the U. S. are estimated at a scary $147 billion annually and growing!

It is not a secret why people become overweight or obese. A relatively minor factor is family genetics. The primary factors, of course, are diet, exercise, and lifestyle. With respect to diet, important elements are the intake of calories and sugar heavy foods. Sodas have been one of the noteworthy culprits, particularly for children. (A 12 fluid ounce can of Pepsi, for example, has 150 calories and 41 grams of sugar!) To deal with this problem, a well regarded doctor at Yale University proposed the idea of a soda tax in 1994 and now 33 states have a sales tax on soda purchases. But there's not yet a federal tax on sodas.

During the course of 2009, however, an effort was launched in Congress and in the Obama Administration to mobilize support for a federal soda tax, both to induce people to reduce consumption and to raise needed revenue to help in a small way to pay for health care reform. A study done at Yale concluded that a penny an ounce soda tax could induce a 23% drop in consumption and the Congressional Budget Office estimated that a smaller tax could raise $50 billion over 10 years. Certainly not insignificant.

Unfortunately, strong lobbying by Coca-Cola, PepsiCo, and the American Beverage Association (ABA) very recently apparently convinced Congress and the Administration to drop their earlier plan to adopt a tax. According to research by the L. A. Times, Coca-Cola last year spent $9.4 million, PepsiCo $9.2 million and the ABA $18.9million! Presumably this was largely spent on paying Washington lobbyists, attorneys, and Congress members on the key Ways and Means Committee, who sought corporate contributions, especially for upcoming reelection campaigns.

Interestingly, on the same day that the L. A. Times had an article on this subject, there was a full-page advertisement in the paper by Coca-Cola boasting about how much they are doing to reduce the calories of their drinks provided to schools and what they have been doing in partnership with the Boys & Girls Clubs of America to set up programs to get kids to increase their physical activity and learn more about proper nutrition. Looks like some clever collaboration with their ad agency and the media.

Two of their expected main arguments opposing the tax were that the tax would unfairly harm poor and lower income Americans and that a tax would quickly lead to many other unwelcome taxes on foods. I don't agree with the unfair harm, but they may have a point with other unwelcome taxes. Not surprisingly, they didn't bring up the harm to these Americans' health and pocketbooks that continuing consumption of sodas would result in! Seems like clear hypocrisy to me and also reminds me of the poor behavior of tobacco companies in past decades in marketing their products.

What should be done? Obviously a great many parents could do a better job of raising their children in terms of diets and physical activity that foster improved health and help them to maintain satisfactory weight levels. Fast foods restaurants and food manufacturers have taken some good steps in recent years in making and promoting lower calorie food options and better disclosing ingredients and nutritional content. But both business groups can do much more to benefit customers as well as shareholders. A separate post would be needed to cover that subject, but it's quite obvious what steps would help.

While I'm sure there are exceptions, the majority of schools and school districts can do a better job of providing more nutritious food in their cafeterias, limiting poor choices in on-site vending machines, a greater focus on prudent exercise in their PE classes and sports programs, and by offering a good required class in their curricula on health and nutrition, if they don't have one already.

If parents, businesses and schools all do their jobs well in this area, there is little need for the government to get more involved, aside from such as continuing to monitor and enforce proper public disclosures on products and appropriate sanitary conditions in factories, food stores and restaurants. However, since this is not the case, and health costs are such a large and growing part of state and federal budgets, it is appropriate for our government to get selectively involved to protect the public and more prudently manage public resources.

Adopting a reasonable federal sales tax on unhealthy foods, like sodas, is one reasonable tool. Working through the Departments of Education and Health and Human Resources to help schools and even parents is another. The bottom line is that better health for our $310 million Americans is, or should be, in virtually everone's interest. It would greatly improve the quality of life for those who are not as healthy as they could be, and it should materially improve the finances of both individuals and, importantly, our country itself, particularly in the long run.


Thomas Dale said...

There is not doubt the American population has gotten more and more unhealthy as a whole over the last couple decades, thanks in large part to the explosion of cheap fastfood and 44oz sodas with free refills on every corner. However, I don't agree with placing a tax on soda. If you did that, why not place a tax on coffee as well since that caffeinates people and raises blood pressure, especially unhealthy considering very few people drink it black, instead adding scoops of sugar. It opens a dangerous door. I don't people telling me what i can and can't put in my mouth. Though I don't think it is the same as smoking for instance, when someones choice to smoke still impacts those around them. Government can make a difference by continuing to help educate kids and parents about healthy habits, not by more taxing.

Viking Views said...

Thomas, you make some good points. I'm not sold on the soda tax as the best way to go. Parents and teenagers should be informed enough to make better choices for what people eat and drink without needing government guidance. But too often the better choices are not being made and it's harming both individuals and the government, because of the very high costs associated with treating the poor health conditions that too frequently result.

I think it's a bigger issue for our society that 1 out of 3 children are overweight or obese than with adults. While I suppose one can make a case that soda and coffee could be treated the same in terms of possible taxation, one should keep in mind that almost all kids drink soda, but most do not drink coffee. Furthermore, while higher blood pressure from drinking coffee is not a good thing, I think you'd agree that getting diabetes and heart disease from sodas and fast foods is much more serious in most cases.