Taxing sugary drinks

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

Download our fact sheet, ‘Why tax sugary drinks’.

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.

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.

How much revenue will a tax raise? A tax of just 1 cent per ounce will generate about $44 per person per year. For a large city like Chicago, this would yield $133 million. In a medium size city like Boston, it would raise about $27 million. These funds can support local health, education and community projects.

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.

HELPFUL RESOURCES


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.

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