Boston Tea Party Remixed: The Implications of Taxing Sugar-Sweetened Beverages

Amber E. Johnson
Academic Affairs Committee Co-Chair
2011 M.D./M.B.A. Candidate, Jefferson Medical College

It was a cold December night in 1773. The British had proposed a tax on tea and the colonists were outraged. Taxes, which were viewed by the British as a means of revenue, had become symbols of oppression to the colonists. As such, the Tea Tax Act became a tipping point that culminated in the Revolutionary War. When three large ships loaded with imported British tea arrived on the docks in Boston, outraged citizens dumped the ships’ cargo into the harbor in protest – an event that became known as the Boston Tea Party.

Today, Americans are no more likely to approve of taxes. However, the fervor with which our dissent is expressed is nowhere near that of the colonists’ in the 18th century. One exception may be the current “Tea Party Movement” which shares the name and sentiment of its precedent; but overall, most US citizens currently accept taxes as part of everyday life. Depending on the state in which we live, Americans pay up to nine percent for sales tax, with cities and counties adding more taxes for various services.

Lately, tax revenue has been examined in respect to sugary drinks and fatty foods. For example, the mayor of Philadelphia has fervently pushed a tax on sweetened soft drinks, backing his argument with data from social service and health care agencies. The sugary drinks have become a focus of intervention because their high calorie content is linked to obesity and diabetes. The logic is similar to the reasoning behind the price increases of tobacco products that occurred in the mid 1990’s. In support of making unhealthy items more expensive, one can argue that lifestyles incorporating tobacco or poor dietary choices increase the total cost of health care. An editorial by the San Francisco Department of Public Health leaders, Mitchell Katz, M.D. and Rajiv Bhatia, M.D. M.P.H, supports raising the prices of unhealthy items. The authors argue that with high costs of such products, the government would be correcting for expenses not previously accounted for in the consumer cost, thus generating revenue to offset the increased health care expense.

Studies are now beginning to elucidate the price increase that is needed to change consumer behavior for fatty foods and sugary drinks. The Coronary Artery Risk Development in Young Adults (CARDIA) study is a 20-year longitudinal study that examined the relationship between food prices and eating habits of over 12,000 people in four US cities. Compelling data from the study show that, when adjusted for inflation, the price of soda has actually decreased over the past 20 years. The CARDIA study also showed that an increase in the price of unhealthy foods was correlated with a decrease in body weight and lower insulin resistance scores, a measure for type 2 diabetes risk. The researchers’ measures predict that an 18% tax – a figure similar to what was proposed by officials in New York City – would produce a weight loss of 5 lbs per year per consumer.  This weight loss corresponds to a potential health benefit, as it would likely prevent the development of obesity and related conditions.

Not surprisingly, soft drink suppliers are unhappy with legislation that would make their products less affordable or accessible. According to a recent article in the Philadelphia Inquirer, Harold Honickman, owner of the Canada Dry bottling company near Philadelphia has expressed his disapproval of the proposed taxes. He was quoted as saying, “I was looking for a way to really help the city in developing proper nutrition, proper education, proper exercise programs,” and has subsequently gone on to offer monetary support to the Pennsylvania department of Health and Human Services. His actions acknowledge the idea that raising drink prices is only one of many ways to improve the health of American citizens.

The sugary drink tax has been shelved in Philadelphia, though some cities still debate the issue. Likewise, national policy makers have implemented laws aiming to fight obesity in other ways. The Patient Protection and Affordable Health Care Act (commonly known as the Healthcare Reform Act) requires restaurants to provide a “succinct statement concerning suggested daily caloric intake” that accompanies the calorie posting in restaurants. In addition, California, Maine and Oregon have been more aggressive in tackling caloric content and obesity as a matter of public welfare. These states were the first to voluntarily comply with the national provision for the listing of calorie counts on menus, in restaurants, on vending machines, and in retail stores.

One unfortunate reality that has yet to be addressed by the proposed taxes and labels is the fact that fast food restaurants and markets that stock their aisles with sugary beverages are more likely to be located in areas where residents are of lower socio-economic status. These residents may be limited in their ability to find healthier food choices. Incidentally, the rates of obesity and obesity-related health problems are disproportionately higher in these low-income areas. Until these issues have been adequately addressed, obesity prevention cannot be fully realized. Katz and Bhatia suggest that the potential revenue earned from taxes on sugary drinks be used to finance subsidies for the producers of fruits and vegetables so these healthy alternatives can be distributed more widely. It has also been suggested that more pressure be put on food retailers in low-income neighborhoods to sell healthier items.

A tenet of economic theory states that as the price of an item increases, the consumption of that item decreases, but only if there are reasonable alternatives. Though relatively inexpensive alternatives to sugary drinks exist (such as, tap water and milk), one can only speculate if those will replace soft drinks as the price structure changes. Assuming that legislation for taxing sugary beverages is eventually passed and that socio-economic inequities are overcome, Americans will decide whether to continue their pre-tax consumption habits or dump their old drinks for something new. If taxes on sugary drinks are finally approved, they will need to be one of several actions taken in a multifaceted effort to improve the dietary choices available to all Americans. Whether through taxes or other means, it is likely that Americans will abandon the unhealthy items, thereby turning to healthier alternatives, once those alternatives become more abundant, affordable and apparent.

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  1. Shu Boiani says:

    At last an outstanding article related to the topic, maintain the great work and also I wish to read much more from you in the future.