As communities seek to address rising rates of heart disease, type 2 diabetes and obesity, many are looking to sugary drink taxes. Communities around the country are considering these taxes as a way to raise money for community initiatives for health and wellbeing while calling attention to the health risks from sugary drinks.
A tax on sugary drinks can help:
- Raise revenue for important programs like healthier food in schools, initiatives to prevent diabetes and other chronic diseases, education campaigns about sugary drinks and healthy eating, and universal pre-k.
- Target investment of revenues in low-income communities disproportionately affected by health conditions caused by sugary drinks.
- Reduce the rates of, and curb rising costs from, obesity, diabetes, heart, liver and dental disease while investing to prevent their occurrence.
- Increase awareness about the harmful effects of sugary drinks and shift sales to healthier products.
- Discourage consumption of sugary drinks by raising their prices.
- Encourage industry to produce and promote more healthful beverage options
Berkeley, CA: A 1-cent per ounce tax raised $1.5 million in the first year. An expert panel awarded grants to community groups like the YMCA and Healthy Black Families for health and nutrition outreach and education and to make fruit and vegetables more accessible to low-income communities. Download our fact sheet, ‘Policy Profile: Berkeley, CA Sugary Drink Tax’ for more details.
Philadelphia, PA: A 1.5-cent per ounce tax (effective 2017) will yield up to $400 million over five years to support universal pre-K, parks and recreation centers, community schools and more.
Download our fact sheet, ‘Policy Profile: Philadelphia, PA Sweetened Drink Tax’ for more details.
Mexico: A 10% tax raised $2.6 billion (in USD) in national revenue over the first two years, while reducing overall soda consumption by 12%.i
Download our fact sheet, ‘Policy Profile: Mexico Sugary Drink Tax’ for more details.
San Francisco, CA: On their second try, voters in 2016 passed 1-cent tax with 62 percent of the vote. Download our San Francisco profile for more details.
Oakland, CA: On the same day in 2016 as two other Bay Area neighbors, Oakland adopted a 1-cent tax . Download our Oakland profile for more details.
Albany, CA: For the 2016 trifecta, Albany joined its Bay Area compatriots in passing a 1-cent tax on Nov. 8. Download our Albany profile for more details.
How do the taxes work?
These are excise taxes collected from distributors of sugary drinks. They can be based either on the volume (usually by ounce) or on the amount of sugar in a drink (by grams or teaspoons). Many experts recommend the latter approach because it directly reflects the amount of harmful substance in the drink. See our guide, “Best Practices in Designing Local Taxes on Sugary Drinks”.
The tax typically would apply to beverages with added sugar, including:
- Sodas (such as Coke, Pepsi, Mountain Dew)
- Energy and sports drinks (such as Monster, Red Bull, Gatorade, Powerade)
- Fruit-flavored drinks (such as Sunny D)
- Sweetened teas and coffee drinks (such as Arizona Iced Tea)
How much tax? Experts recommend increasing the price by at least 20%, which is around 2 cents per ounce or 0.5 cents per gram. Communities decide on a tax rate based on revenue and health needs while considering what is politically feasible. (For more on this topic, see our tax design guide).
How much revenue will a tax raise? In order to project the amount of revenue available to support local health, education or other investments, you first need to decide the rate per ounce. A tax that is too high might be very effective at shifting purchases to healthier drinks, but could end up raising too little revenue as a result. Politics, too, is a key consideration. To explore these dynamics yourself and ballpark how much a tax might raise in your community, check out the Revenue Calculator for Sugary Drink Taxes, recently updated by the Rudd Center for Food Policy and Obesity at the University of Connecticut, in collaboration with Healthy Food America.
Should “diet” drinks be included? There is strong scientific evidence associating sugary drinks with higher rates of chronic diseases such as type 2 diabetes, heart disease, high blood pressure, liver disease and dental disease. The evidence of harm from diet drinks is less certain. Therefore, we recommend not including diet drinks in beverage taxes. For more on taxing diet drinks, see our policy brief. For a summary of what is known about health effects of artificially sweetened beverages, see this research brief.
What about 100% fruit juice? Many nutrition experts have expressed concern that fruit juice contains sugar in amounts equal to or greater than those of drinks with added sugar, like regular soda. However, the science on the health impact of juice has yet to establish a clear red flag, so jurisdictions tend to exempt it. Read more about the science on 100% juice.
What places can adopt a tax? All states and many cities and counties have the legal authority to impose a tax. Contact Healthy Food America for more information.
- Roadmap for Successful Sugary Drink Tax Campaigns is designed to help you and other advocates and policymakers learn how sugary drink taxes work, how to lay the groundwork with education and policy campaigns, find a political path to passage, estimate revenue and form a winning coalition.
- Best Practices in Designing Local Taxes on Sugary Drinks is a guide to help communities design sugary drink taxes for the maximum benefit. It identifies critical policy considerations such as legal, administrative, and political factors.
- Model legislation – Developed by ChangeLab Solutions, this model helps states that want to impose an excise tax on these beverages and earmark the proceeds for programs to prevent and treat obesity.
- Responding to Industry Arguments. A guide to opposition claims you are likely to hear, and advocates’ responses to them.
- Revenue Calculator for Sugary Drink Taxes, an online model that allows policymakers to see the revenue impact of varying rates and approaches.
- Check our Berkeley vs. Big Soda for some inspiration from a great success story.
- Kick the Can is a comprehensive resource on sugary drinks with some tax-related information.
iColchero MA, Popkin BM, Rivera JA, Ng SW. Beverage purchases from stores in Mexico under the excise tax on sugar sweetened beverages: observational study. BMJ. 2016;352:h6704.