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Update: Sugary Drink Tax

Scientific research has shown that the reduction in the consumption of sugary drinks will help improve rates of obesity, diabetes, dental caries, and heart disease in our children. In June, we had a hearing on our Sugary Drink Tax bills which try to address the impact that added sugar has on our children by putting in place several policies.

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These policies are: 

  • Establishing a tiered excise tax policy for sugary drinks based on the amount of sugar they contain. As the amount of sugar increases, the amount of tax increases.
  • Removing marketing in schools of any products that are not allowed to be sold there
  • Removing sugary drinks as the default option for kid’s meals in restaurants
  • Allowing for warning labels to educate the consumer of the health effects of sugary drinks.

The revenue from a tiered tax excise tax on sugary drinks will raise at least $368 million to the Children’s Health Promotional Fund to provide critical funding for access to clean safe drinking water in our communities, and other programs helping children and families most in need.  Harvard researchers estimate that if the excise tax was just a penny per ounce tax on sugary drinks in the Commonwealth it would prevent 45,900 cases of obesity by 2025 saving the Commonwealth $33.40 for every dollar invested. A $.02 per ounce tax on sugary drinks would prevent 89,400 by 2025 saving the Commonwealth $65.60 for every dollar invested. The proposed tiered tax would fall somewhere in the middle, likely closer to the $.02 estimate.

The tiered tax will mean that a beverage that has less than 5 grams of added sugar will not be taxed, those with 5 to 20 grams of added sugar will be taxed a 1 cent per ounce and those above 20 grams of added sugar will be taxed at 2 cents per ounce We believe that this allows for not only more consumer choice, but it allows for the industry to reformulate their products to be in the lower tax brackets. This is also an excise tax and will be passed on to the consumer on the shelf when they go to select the product not a sales tax which is imposed by the retailer at the time of purchase. This is based on how we tax tobacco products and alcohol. 

Early research shows that these taxes are effective at reducing sugary drink consumption—in Mexico after just 2 years sugary drink sales have been reduced by 9% and water sales have increased by 2% in Berkley after just one year sugary drinks sales have been reduced by 10% and water sales have increased by 16%. Three common claims against sugary drink taxes are that taxes are “regressive” (low-income people will pay more), that people will compensate by purchasing in nearby cities, and that taxes will cost jobs. There is little evidence from the research out of Mexico, or Berkeley to back up these claims. Opponents of sugary drink taxes argue that low-income consumers will be inequitably burdened by an excise tax. What is known is that low income communities are currently disproportionately affected by the chronic diseases associated with sugary drink consumption. An important purpose of the tax is to reduce consumption of sugary drinks and improve public health. In Mexico, low income households reduced purchase and consumption of sugary drinks more than higher income households and colleagues similarly found a large impact on consumption in low-income neighborhoods in Berkeley. Reduced sugary drink purchases could free up more money for healthier foods and beverages, and reduced consumption among low-income communities could ultimately contribute to reducing health disparities.  We also know that Big Soda spend millions each year marketing sugary drinks targeted to communities of color. In fact, African-American children and teens see more than twice as many television ads for sugary drinks than their white peers. Lower-income African-American and Latino neighborhoods had more outdoor ads for sugary drinks than lower-income and higher-income white neighborhoods. In these same neighborhoods, we see disproportionately high rates of heart disease, type 2 diabetes and other chronic diseases that are brought on, in part, by consuming sugary drinks; therefore, everything we can do to discourage consumption should be done. Additionally, revenues from sugary drink taxes are generally earmarked for social programs serving low-income communities, such as improving education and healthy food access. Overall positive impacts of sugary drink taxes will be progressive - low-income communities will reap the most benefits from lowered consumption of sugary drinks and from increased investments in their community. As for jobs and cross-border shopping, it was found that only two percent of people bought sugary drinks outside of Berkeley due to the tax, and store revenues fell no more in Berkeley than in neighboring cities.  It is projected that sugary drink taxes would have a small net positive impact on jobs, and preliminary observational data from Mexico and Berkeley do not support the industry’s claim of job loss.  Employment data from 2015 in Mexico showed no decrease in total employment in beverage or food retail industries, and data from Berkeley found that food sector jobs increased by 7.2% in the year following tax implementation. Industry has alleged that sugary drink taxes are a “grocery tax” because retailers shift the price increase to other food and beverage products. Evidence from Berkeley suggests that consumer’s average grocery bill is not affected by a sugary drink tax. Early evaluations of sugary drink taxes implemented in Mexico and Berkeley, CA show that taxation is an effective strategy to reduce sales and consumption of sugary beverages, without the negative economic consequences predicted by industry opponents. While it is too early to determine the health impacts of this reduced consumption, several robust modeling studies project reduced incidence of obesity, diabetes, and heart disease, as well as substantial health care savings. 

If trends continue, public health experts predict that sugary drink taxes have the potential to be one of the most effective policy strategies to achieve health equity. People will still be free to buy sugary drinks if they choose. And, at the same time, the government will be fulfilling its responsibility to protect the public’s health by putting a policy in place that has the potential to substantially reduce diseases such as type 2 diabetes and heart disease, reduce healthcare expenditures, and even to increase healthy life expectancy.  

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