Thursday, January 19, 2017

Taxing Added Sugar

The latest trend among municipalities, counties, states and possibly entire nations is to find new ways to generate revenue by taxing unnecessary vices.

Taxing cigarettes, alcohol, gambling, recently legalized Cannabis and now sugary beverages is commonly implemented in a simplistic, almost ham-handed fashion which doesn't really yield the kind of revenue that will keep local authorities from additionally creating new ordinances so they can generate revenue through fines.

The state of Illinois is implementing a tax on sugary soft drinks. A state senator wants to tax 2 liter bottles of soda an extra $0.70 per bottle. Other proposals suggest limiting the tax to any drink with over 5 grams of sugar, then charging a penny per ounce. However, the website Illinois Policy argues that the tax "will fall upon those who can afford it least."

True, but the point of the tax is to create a disincentive toward consuming added refined sugar, which ultimately burdens the state's medicare and medicaid program with cases of diabetes and other sugar-related ailments, which seem to be prevalent among low income patients.

So the tax should not only be on soft drinks but on anything with added refined sugar, and perhaps even added salt. It can be as simple as charging $0.01 per gram of added sugar. This method is all-inclusive with processed foods and excludes fresh, natural produce.

The difficulty is closing the loopholes around all the various names given to sugar by the industry. The industry has myriad names for the substance which must be identified clearly in the law.

If each person in the U.S. consumes 28kg of sugar per year like they did in 2008, (that would be $280.00 per year per person.) According to the USDA, Americans consume an average of 150-170 lbs of sugar per year per person, which could yield around $680 to $770 per year in tax revenue from taxes.

The pressure of the disincentive might reduce the amount consumed resulting in lower tax revenue, but it will more than make up the difference in long term health care costs. Another unintended benefit of lower health care costs might be money diverted into wages and salaries, if employers were so inclined.