The rising popularity of the soda tax

Your Guide to State, Local, Federal, Estate + International Taxation

soda tax, raising revenue, tax

There seems to be a constant flow of new taxes these days. States and municipalities are always looking for good ideas when it comes to raising revenues and what better way than to expand their tax base. A large tax base with rising popularity is the “soda tax” on soda and other sweetened beverages.

Most recently, localities in California, Colorado, Illinois, and Pennsylvania have enacted a soda tax. These soda taxes differ greatly in each locality in how they are calculated and implemented but there is no doubt that the revenue they produce is vast.

For example, Philadelphia’s new beverage tax went into effect on January 1, 2017 and adds a 1.5 cent per ounce tax on drinks that are artificially or naturally sweetened. These drinks include soda, juice, sports drinks, ice tea, and energy drinks. This means that a case of Propel flavored waters that originally retails for $5.99 has a final cost of $9.75 after tax. The city is expecting to generate $91 million in new revenue.

Other localities have a looser definition of “soda” and include soda water, coffee, and tea regardless of sugar content. In contrast, Boulder, Colorado imposes its tax only on beverages that contain at least five grams of caloric sweetener per 12 fluid ounces. Cook County, Illinois and Philadelphia tax beverages that use non-caloric sugar substitutes as well.

It seems likely that the recent wave of soda taxes is not over. Many more states and municipalities are planning on putting this new “soda tax” up for vote. Most recently, on May 2nd voters in Santa Fe, New Mexico voted “no” to a soda tax of 2 cents per ounce but the vote was fairly close. It just may end up back on the ballot at a lower rate of say 1.5 cents per ounce. Policymakers are using this tax to implement a public policy agenda of encouraging healthier consumption habits.

The question becomes….how will you vote when the “soda tax” ends up on your ballot?

Stacy Redmond