SPECIAL REPORT—Many Americans who smoke are all too aware of the increasing taxation on cigarettes. However, other indulgences consumers splurge on –like alcoholic beverages and even soft drinks—are being targeted for added federal taxation to offer supplementary financing for government programs such as the Obama Administration’s proposed universal health care reform.

Earlier this month, the Senate Finance Committee heard proposals on how to pay for President Obama’s healthcare agenda, which is expected to cost over $1 trillion. 

The Committee heard from Executive Director of the Center for Science in the Public Interest, Michael Jacobson, PhD, on his recommendations, which included implementing a federal soft drink tax and an increase in the excise tax of alcoholic beverages due to their negative health consequences.

The Center proposes that while reducing consumption of these beverages, increased taxation on soft drinks and alcoholic beverages would also generate increased revenues of approximately $28 billion annually. 

Soft drink tax proposal

Jacobson outlined his justification for taxing soft drinks, which he contributes to increasing obesity in two-thirds of Americans. “While many factors promote weight gain, soft drinks are the only food or beverage that has been shown to increase the risk of overweight and obesity, which, in turn, increases the risk of diabetes, stroke, and many other health problems,” Jacobson states. “Soft drinks are nutritionally worthless, but add a lot of calories to the diet.”

According to the Center’s statistics, beverage companies market more than 14 billion gallons of calorie-laden soft drinks annually, which is equivalent to about 506 12-ounce servings per year for every man, woman and child.  These figures include carbonated sodas (non-diet), energy drinks, sports drinks, fruit drinks and ready-to-drink teas.

Many state governments have imposed taxes on soft drinks or have introduced bills in hopes of creating taxes. Currently, Arkansas, California, New York and West Virginia have special taxes on soft drinks to generate revenue. North Carolina is considering a statewide tax on soft drinks, as well.

Jacobson recommended two proposals on soft drink taxation: a one cent tax per 12-ounces or a one cent tax per ounce on all non-diet soft drinks that would include both carbonated and non-carbonated. He estimates that such 1-cent per 12-ounce tax would generate $1.5 billion annually and a 1-cent tax per ounce would raise almost $16 billion per year. The greater tax would likely reduce consumption and slow rising rates of obesity, especially in children while, long-term, cutting the number of cases of diabetes, heart disease, stroke, cancer, sleep apnea, osteoporosis, tooth decay and dental erosion that is often associated with frequent soft drink consumption.

Proposal for increased alcoholic beverage excise tax

The Center’s proposals remind that the first 120 years of our nation’s existence was funded a great deal by revenue from taxed alcoholic beverages. While the federal and state governments still tax alcoholic drinks, those revenues only account for less than .04 percent of total revenues and that the federal government currently receives about $9 billion annually from the excise tax.  Furthermore, the tax rate on alcohol sales has only been raised twice since 1951.

In an effort to reduce the increasing health costs due to alcohol abuse and alcoholism, the Center recommends to Congress that the tax be raised in all alcoholic consumption products equally.

Raising the alcohol taxes would marginally reduce alcohol consumption and problem drinking. The Center’s most drastic proposal would increase tax on distilled spirits by 50-percent to $20.25 per proof gallon and boosting beer and wine tax rates to the same level. This would generate $12 billion in new revenue annually. In turn, this would reduce consumption by several percent according to the Center’s figures.  Jacobson states, ‘that would lead to less drinking, less harm associated with problem drinking, and cost savings for our health-care system.’

“Raising alcohol excise taxes is well-justified, painless for the vast majority of consumers, and good for public health,” Jacobson states in the Center’s proposal document to Congress. This conclusion is reached because not all Americans drink and those who do consume alcoholic beverages drink sparingly.

Some polls suggest that many Americans favor increased taxes on alcoholic beverages, but due to the more extensive consumption of soft drinks, more consumers would oppose radical soft drink taxes.