A recent debate concerning the proposal of Tax on Sugary Beverages has created a huge controversy and divided opinion. This division emanates from predictable sources. On the one hand, leading manufacturers and distributors of soft drinks have formed a vanguard of natural opposition to the proposed tax. On the other hand, a number of health lobbies and groups pledge their support for the proposed tax. Not least included among these is the broad support of the current United States administration of a measure which aims at tackling obesity amongst the general populace. Dr. David Ludwig, a director at the Boston Children’s Hospital ‘optimal weight for life program’ opines that “A tax on sugar-sweetened beverages is really a double-win” 5
In between these two polarizing opinions are the skeptics who opine that the measure may not go beyond legislation and above all ‘point to political obstacles and question how much of an impact it would really have on consumers.1’
Not surprisingly, the chief executive of Coca-Cola, Muhtar Kent, calls the proposed tax ‘outrageous’ as Coca-Cola reported total revenue of $31,944 million in 20082. If the government imposes tax on sugary beverage, it is more than likely that the quantity demanded would fall for these products resulting in a noticeable decrease in the revenues for companies like Coca-Cola. In April 2009, there was a tax increase on tobacco products in Indiana that saw an increase for each pack of cigarettes by $.62. As a result, it was reported that the sales of cigarettes decreased tremendously3.
Nonetheless, we must not only view the proposed tax from the perspective of manufacturers but we also need to consider the view of merchandising companies who sell these sugary beverages to customers. For example, there are takeout restaurants which provide customers with such great offers as a meal with a soda. With the proposed tax on sugary beverages, their marginal costs would increase, in effect causing a decrease in profit for sellers and ultimately, translate into a rise in the selling price of the beverages.
However, for those who do not accept this, the estimated economic advantages and benefits that even a proposed one penny per ounce tax on sugary beverages would generate, no doubt provides a lucrative and added incentive. Those in favor of this side of the argument include a sizeable political body made up of ‘New York City health commissioner, Thomas Farley, and Joseph W. Thompson, Arkansas surgeon general.’ With a figure of ‘$14.9 billion in its first year4’, this understandably counts as a good cause for considering such a tax not merely viable but hugely desirable. Further to this, the additional revenue could be used to support more health care initiatives in the way of helping ensure greater efforts are made towards combating the growing problem of obesity.
In terms of popularity and speaking in terms of consumerism, this approach seems a far better bet for securing future funding for a much needed pro-health initiative that assuredly seems to be gaining the full support of the government. This will cause ‘for-now’ the much-opposed soft drinks conglomerates to rethink their position. They might only need to look at how other companies such as McDonalds have in recent years successfully capitalized on the need to acknowledge and inform consumers of the high sugar contents found in their products. In this sense too, manufacturers of sugary beverages’ are already well-schooled in promoting non-sugary beverages. Often, these sugar-free saccharin alternatives, require simply adding of the word ‘diet’ to what have for many consumers already become household beverage names.
As support in America grows for the healthier lifestyle and a healthier nation, surely this is to be preferred over the recently proposed tax-hike by Montana Senator Max Baucus, on what to many amounts to having no-choice in the matter – ‘an array of taxes and fees on high-end group insurance plans, drug and medical device makers’. This type of increase imposes lesser choice on people making crucial decisions regarding which plan, medicine or medical device better suits their needs.
The consequences of the proposed tax on sugary beverages impact on a similar (and possibly life-threatening) way. It might have an influence on which of the two beverages (sugary or non-sugary) consumers choose to drink on a regular basis. The proposed tax would not appear (at least in the eyes of today’s newly ‘much-better informed consumers’) to amount to a huge price-hike on the former, and just as importantly, it would not interfere with people making informed choices when deciding to drink one beverage or the other.
That soft drinks companies do not accept their products as bearing any responsibility for adding to the nation’s growing obesity, is a view that does not fit the spirit of the newly ‘switched-on’, health-conscious consumerist age we live in. This will eventually come to influence a majority of those opposed to this tax, Congress included. A little imagination from soft drink manufacturers should neither mean any overall loss in profits, nor should it consign them to occupying a place among the rapidly expanding list of foods and drinks companies that the American public today sees as responsible for their nation-wide expanding waistline.
Works cited
Brownstein, Joseph. “Public Health Leaders Propose Soda Tax”. ABC News. 2009. Web.
Coca-Cola Company Revenue & EPS. Nasdaq: 2009. Web.
Effect of Tobacco Tax Increase. WTHITV, Terrehaute IN. 2009. Web.
Neuman, William. “Proposed Tax on Sugary Beverages Debated”. The New York Times. 2009. Web.
‘Soda Linked to Adult Obesity,’ California Center for Public Health Advocacy. 2009.
Baruch College. 2009. Web.
Footnotes
- Neuman, William, ‘Proposed Tax on Sugary Beverages Debated,’ New York Times. 2009.
- Coca-Cola Co. Revenue. Nasdaq. Web.
- Effect of Tobacco Tax Increase. WTHITV, Terrehaute IN. 2009.
- Neuman, William, ‘Proposed Tax on Sugary Beverages Debated,’ New York Times. 2009.
- Brownstein, Joseph. “Public Health Leaders Propose Soda Tax”. ABC News. 2009.