A Tobacco-Style Tax on Fattening Drinks

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Obesity is now closing in on smoking as the leading cause of preventable death in the U.S. But unlike obesity, smoking rates have been declining since 1964, when 42% of American adults smoked. In November, the CDC reported that the U.S. smoking rate had dipped below 20% for the first time on record, and public health experts give much of the credit for that decline to extremely high taxes enacted over the last 15 years on tobacco products.

But Economist Frank J. Chaloupka, director of the Health Policy Center at the University of Illinois at Chicago, says there is no certainty that an obesity tax would have the same impact. "If you raise the tax on soft drinks, people might just switch to other beverages or foods that are just as high in calories. There isn't an easy alternative to cigarettes." Still, says Chaloupka, "an 18% tax is high enough where you would likely see some noticeable impact on consumption."

What About Orange Juice?

Whether it would have a noticeable impact on obesity is another question with no clear answer. In 2007, Yale's Rudd Center published an analysis of 88 studies that looked at soft drinks and health, finding a clear association between soft drink consumption, increased body weight, and poor health outcomes. The analysis also found that "studies funded by the food industry reported significantly smaller effects than did non-industry-funded studies."

Still, any consumption tax on so-called junk foods would run into considerable objections over how exactly to define junk food. Liz Morrill, founder and chief executive officer of Fizzy Lizzy, a brand of sparkling juices, complained in a statement that Paterson's proposed tax is "completely irrational" because it would tax her product while not taxing 100% orange juice, which is also high in calories and sugar. "Even more perplexing is the fact that diet sodas, laden with artificial sweeteners, artificial flavors, and preservatives—which numerous scientific studies have shown actually increase one's yearning for sweets—get a pass, but all non-diet carbonated beverages, regardless of calorie and nutritional content, are heavily taxed," she says.

Morrill suggests that an obesity tax should be based on criteria such as calories and sugars per ounce. The proposal given to French Budget Minister Eric Woerth in July proposed a value added tax of anywhere from 5.5% to 19.6% on all foodstuffs considered "too rich, too sweet, too salty, and which are not strictly necessary." Selling a sweet- and salt-loving American public on such a tax won't be easy, however. A Quinnipiac University poll released in late December found that 60% of New York State residents oppose Paterson's proposed tax on sodas, including 58% of those who say they prefer diet drinks over regular soda. And in November, Maine voters overturned a wholesale tax on bottled sodas as well as on the syrup used to make soda, which was signed into law the previous April.

Brownell suggests that such tariffs would be more palatable if they were labeled a "nutrition tax" rather than an obesity tax. "Ideally the money raised would then be used to subsidize healthier foods such as fresh fruits and vegetables. That would get around the issue of it being a regressive tax."

Arnst is a senior writer for BusinessWeek based in New York.