When I tell people that I study soda taxes, I typically get one of two types of responses back. One, what’s a soda tax? And, two, is that that “Bloomberg thing”?
In fact, the 2012 Bloomberg-led initiative called the Portion Cap Rule is quite a bit different than a classic tax on sugar-sweetened beverages. Bloomberg’s proposed amendment to the New York City Health Code imposed a 16-ounce cap on sugary beverages sold by food service establishments.
In contrast, the soda tax I research is technically referred to as a tax on sugar-sweetened beverages (SSBs) since it includes soda along with sports and energy drinks, non-100% fruit drinks, sweetened water, and pre-sweetened coffee or tea. Under this definition, drinks such as regular Coca-Cola, Gatorade, bottled Starbucks Frappuccinos, and Red Bull are all subject to the tax.
Seven U.S. local governments have passed laws levying a volumetric excise tax on SSBs: Boulder, Colorado; Philadelphia, Pennsylvania; Seattle, Washington; along with Albany, Berkeley, Oakland, and San Francisco in California. The tax rates vary slightly; most cities levy a penny per ounce tax, although Boulder, Philadelphia, and Seattle levy two cents, 1.5 cents, and 1.75 cents per ounce taxes, respectively. The city of Philadelphia is the only jurisdiction that, in addition to SSBs, also taxes artificially-sweetened beverages (ASBs) made with zero-calorie sweeteners such as aspartame, sucralose, or stevia.
In contrast to ad valorem (Latin for “according to value”) taxes like sales tax and value-added tax which are fixed percentages, specific (or per-unit) excise taxes are fixed currency amounts that depend on the quantity of the items. Moreover, specific excise taxes are indirect, meaning they are levied on the distributors. The distributors then pass that tax burden onto the retailer, who then passes it onto the customer through incremental price increases. Excise taxes levied on SSB distributors provide a jurisdictional basis for the taxes, meaning anyone living within the borders are subject to the tax. This is in contrast to an excise tax levied on the manufacturers which would only affect a small number of localities where the manufacturing occurs.