The Pros and Cons of Taxes on Carbonated Beverages

With the recent passage of Obama's health care reform bill, two topics have been in the news frequently: tax increases and the health of American citizens. One such tax increase is the so called "soda tax" which have been mentioned in Congress multiple times over the past few years; however, they have been unsuccessful in beening passed into law on a national level.

Pro: Fight Obesity

One of the most prominent arguments for instituting a national soda tax is to provide incentive for Americans to eat and drink healthier products and thus decrease obesity. There are numerous medical associations that have publicly announced their support of taxes on sugary beverages and some have even conducted studies to examine the potential health benefits of such a tax. A study conducted between the years 1985 and 2006, involving over 5,000 patients, showed a direct correlation between higher soda prices and the average daily caloric intake of Americans. Their study found that when the cost of a can of soda increased by 10%, the average patient consumed 7.12% fewer calories per day.

Con: Little Affect on Obesity

For every expert standing behind a soda tax, there is another who opposes it. Although some studies link soda prices with caloric intake, other health experts claim that problems with moderate eating, and lack of physical activity are more to blame for the countries obesity problem than sodas. When discussing the issue Dr Pepper Snapple Group Inc (DPS.N) Chief Executive Larry Young even said "let's put warning labels on sofas, because that's where kids are sitting instead of (being) outside playing."

Pro: Additional Federal Revenue

There is no denying the fact that the federal government is looking for ways to increase revenue. Currently, there are about a dozen local government agencies - including Kansas, Colorado, and the city of Philadelphia - that have or are likely to begin enforcing soda taxes. The soft drink industry takes in about $110 billion per year in American sales, and whether or not a soda tax will help improve the health of the country, it could generate additional federal revenue. With so much spending going on in Washington, Congress is considering almost anything to generate more revenue.

Con: Recycling Fees

A large reason that many government agencies are hesitant to institute soda taxes is the fear that it might have an effect on the tax levied on the cans, bottles, and glass containers that carbonated beverages are sold in. These taxes are used to promote recycling, not public health, and are not generally that controversial. However, some experts are worried that adding a soda tax, on top of a recycling fee, could cause consumers to question these taxes on recyclable containers.

Pro: Incentives for Soda Company

Even before soda taxes became a popular topic of conversation, PepsiCo and Coca-Cola have both been working on tactics to improve their appeal to the ever growing group of health conscious Americans. However, with soda taxes becoming a reality in dozens of places across the country, the pressure is on for soft drink makers to produce healthier products.

Recently, PepsiCo responded to this new demand by creating a Gatorade beverage with all natural coloring and flavoring to be featured in health stores later this year. The company has also announced long term plans to make all of their products healthier over the next decade. They will reportedly cut the average amount of sugar per serving by 25% and the saturated fat by 15% in all products.

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