Tax Soda? How About Making Fruits And Veggies Cheaper, Too?

Prof. Sean Cash of Tufts University (Kelvin Ma/Tufts University)

Prof. Sean Cash of Tufts University (Kelvin Ma/Tufts University)

[Readers, please weigh in: Even putting the soda tax issue aside, should government intervene to make fresh fruits and vegetables cheaper?]

Last July 31, a proposal to tax soda in Massachusetts officially died.

Temporarily, that is. Now, it lives again. Last week, Gov. Deval Patrick revived it in his state budget, calling to lift the sales tax exemptions on candy and soft drinks.

Just to recap: Since candy and soda are considered food (though we could certainly debate whether they should be), they carry no sales tax when you buy them. Anti-obesity advocates have been pushing to change that. A couple of states — Washington and Colorado — have restored the sales tax to sugary stuff, but the political battles are hard.

Here, though Massachusetts tends to be a highly progressive state on issues of health, the soda tax proposal just couldn’t gather the political momentum it needed in the last legislative session.

Now that the idea appears headed back onto the political front-burner, I spoke with Sean Cash, an associate professor at Tufts and an economist who has worked on food taxes and how they influence consumer choices. Our conversation, lightly edited:

So what do you think of soda taxes?

It is a little perverse right now that we’re favoring the soda and not favoring something healthier just because it was steamed and spiced a little.

It depends on the motivation. In general, from the health point of view, the discussion has been, “Let’s tax soda: It’s not good for you, and if we raise the prices, people will drink less of it.” That’s all true — when prices go up you buy less, but with soda, and food and beverages in general, we don’t buy a lot less. It’s what an economist calls inelastic. We do pay attention to price, but not a huge amount. It’s hard to get people to stop drinking what they like by using price. I can get people to switch brands pretty easily, at least for today, but to get people to stop drinking soda, a tax is a blunt instrument.

The flip side is, if I raise the price and you don’t drink less, it’s a great way of raising revenue. Though the evidence shows that it is regressive: Lower-income people will pay more, not just relative to their income but in absolute terms as well, because lower-income people tend to spend more on soft drinks.

The way Patrick is doing it is less concerning, because he’s wrapping it up in a whole reform of sales tax, to lower the sales tax by about a percentage point but extend it to cover sodas and candy. So the increased taxation on soda would be somewhat regressive, but sales taxes in general are regressive, because lower-income people save less money and spend a higher percent. So to lower the sales tax across everything is progressive, and he makes part of that money back by taxing soda and candy, and part from income taxes. So the whole suite of changes would probably be on balance slightly progressive, even though the soda tax is regressive.

Another approach would be to put an excise tax on soda — a separate tax the way we have separate taxes on cigarettes and alcohol. There’s not a lot of that in this country, though France put one in last year. It’s a good way to raise revenue. It’s not going to help health much but people would reduce their consumption a little bit.

Right now, we have a sales tax where we don’t tax soda, and we don’t tax fresh fruit and vegetables, but we do tax prepared vegetables. So if you go to the supermarket and go to the take-away food section and get a container of hot food — if you buy the steamed sesame green beans — that is subject to a sales tax for prepared food items. But the soda you grab out of the cooler next to it isn’t taxed. So even though I’m not a big proponent of soda taxes to improve health, it is a little perverse right now that we’re favoring the soda and not favoring something healthier just because it was steamed and spiced a little. So if you’re going to tax things, you might as well tax stuff you want to discourage, because a higher price will put a little behavioral damper on people’s consumption.

So what’s this idea of a ‘thin subsidy’? 

sodabottles

In our research, we’ve modeled what happens if you lower fresh fruit and vegetable prices in terms of disease outcomes. It’s similar to soda in that if I make it just a little bit cheaper, I’m not going to change what people eat a huge amount. But I will get people to eat more fresh food and across the population that can help health, particularly because the people with the lowest income tend to eat the fewest fresh fruits and vegetables. if you add one serving of fresh fruit and vegetables a week to someone’s diet, it makes a lot more difference if you’re not eating a lot to begin with than someone already eating ten portions. So the extra benefit of increasing that consumption is higher for folks currently eating little. So it’s progressive from an income point of view, and it would make a difference for health.

There has been talk about using taxes and subsidies together to really change prices of food. As in: Let’s tax the heck out of soda, double the price, and make all the fruits and vegetables a lot cheaper. The problem is that it’s very hard to implement. You’re putting a lot of pressure on the retailer, and the bottom line is that small price differences only make very small differences in consumption. If you really want to change prices a lot — double the price of soda, the way we did with cigarettes — then you can change behavior in a bigger way, but then you are also really micro-engineering people’s food choices, and people will object because they’ll see it as paternalistic, and very heavy-handed.

I don’t think there’s the political will for that. It’s complicated, and if you’re going to get that dictatorial about what people should be eating, is the price system the best way to do that? We’ve not shown the will to be that aggressive.

A lot of people blame agricultural policies for obesity, but that’s way overblown. There are price differences, but they’re minor, and they’re all to protect producers, it’s never done with health in mind. So you could put a health filter on production policies, as we’ve done with environmental considerations. But the truth is, we also mess with prices in the way we subsidize transportation infrastructure, water conveyance in western states, and all of our agricultural policies.  We mess with prices in all sorts of ways that are bad for health but also in some that are good for health — usually without thinking about health at all.

So how could we engineer the state’s coming tax plan so that it’s optimal for health but within the realm of the politically possible?

I think small changes in the sales tax are minor but useful. Giving tax breaks for physical activity is something you can do, though it’s an expensive way to go. Public information and public messaging is useful up to a point. Obesity has increased, but it’s been gradual, and so small changes can reverse that trend. So on the one hand, you may not change the world by taxing soda three cents. On the other hand, small changes got us into trouble, so small changes can help get us out. But you’re not going to have overnight success.

Better food labeling will help, too. All these things together, to can change people’s overall perceptions about what’s appropriate and healthy.

Taxes won’t make a big difference on their own, but if you tax something, and scream up and down that you’re taxing it because it’s bad, and do fifty other things — then maybe…Even tobacco took decades, and foods are always going to be messier because we don’t have that clear dose response, you can’t demonize even the least nutritious foods as being as bad as tobacco. Soda is as useless a food item as you can find and even that’s not straightforward.

The way Patrick has designed his tax proposals, I personally am in favor. If he starts billing this as a huge health-promoting activity, well, no. It’s removing a tension that doesn’t need to be there, and sending a small signal.

Further reading: How one man tried to slim down big soda from the inside.

 

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  • Lee

    agree about not subsidizing corn – isn’t taxing soda a regressive tax as is taxing cigarettes, alcohol, and gas – not to mention aggressively marketing the lottery. It’s hard to imagine more effective solutions but perhaps the poster who suggests NOT subsidizing corn is on to something – artificially cheap corn has unintended consequences – if we’re going to subsidize shift those funds to depress the prices of healthy foods and/ or channel some of those funds to create aggressive marketing campaigns intended to shift consumption off of crap food onto healthier foods.

  • http://twitter.com/nellexicon Nellie Nikolov

    Sodas already have a “tax” in MA. It’s called a bottle deposit. MA made $33.5 million in unclaimed bottle deposits in 2011. http://www.bottlebill.org/about/unclaimed.htm

  • http://www.facebook.com/SolaceSoulless Amanda Renee

    If people want to make unhealthy choices it should be our freedom. Besides, we have to keep the healthcare industry in business.

    • john

      yes, and by and large they don’t feel they should bear the burden of the consequences of exercising their rights.

    • CastIronWithRustSpots

      My company health insurance adds a $1200 premium for users of tobacco products. I’m pretty sure they’re going to start taxing by BMI pretty soon. You don’t have to worry about the insurance industry.

  • Dino Romano

    The average middle class family of four CAN NOT AFFORD to eat the required amount of daily calories purely from fresh vegetables and fruits.

    Until this imbalance is rectified we will have a national health crisis and unaffordable health care.

    Subsidizing, or giving tax breaks, for anyone producing vegetables and fruits for U. S. consumption, would go a long way to achieving that.

    • Lee

      there are plenty of fruits and vegetables subsidized and many, especially at this time of the year, come in from offshore and are sold relatively cheaply. Bananas are a good example of a subsidized imported fruit.

  • kaskanator

    Subsidies are an extremely small fraction of the food dollar. Like Dr. Cash said, its the subsidies of the water, roads, etc., that make a bigger difference in the actual price of things. Most subsidies, at this point, are in the form of crop insurance. Although I’m all for depleting the power of the commodity lobbies and increasing the strength of regional farm systems, as a public health professional I know that won’t make a huge difference in people’s health. This is an idea that is quite popular, because it demonizes powers that are pretty despicable, but the problem is that the amount of change would be minimal. In addition, limiting SNAP (Food Stamp) benefits would most likely mean that the people using the benefit could not afford enough calories–literally. Food Stamp benefits are based on a menu plan that takes around 16 hours per week of in-kitchen cooking time, not counting making smaller things like eggs and sandwiches. Participants of the program are making an economically sound decision (for the short term) to buy crap food. Limiting the consumer in this case is “blaming the victim” of our toxic food system. Change the food system, don’t force the most vulnerable of the population to be our experimental group in working around it. If you were to tax soda and nutritionless food and lower the prices of produce as Dr. Cash suggests, you benefit the whole population (and its the WHOLE population that is gaining weight, not just SNAP participants) without heaping more unrealistic expectations on people who are just trying to feed their kids on minimum wage.

  • WeeItsNookies

    Nonsense. Let’s also not forget how caffeine is a drug, and it’s addictive too. The government has no right taking it upon themselves to determine what we can and cannot put into our bodies. Taxing it is basically a would be ban that they know they can’t pass. Instead people who consume massive amounts of this crap, should be paying a tad bit extra for health insurance. Like if someone smokes,etc.

    Not to mention, this isn’t attacking the underline cause (typical liberals). It isn’t the unhealthy drinks/food. It’s the lack of exercise. People get fast food..uhh because it’s fast, which probably means they don’t have the time to spend X amount of time at the gym, resulting in being overweight. Or people are just lazy. Everything is fine in moderation. At this point everyone knows that “hey if you drink this or eat that you’ll die of X in a few years” but people still make that choice.

    • durham kid

      No, WeeitsNookies, I disagree with your premise.

      The gov’t is NOT telling you what you can and cannot put in your body – it is a tax that should reflect the increased cost to society of smoking cigarettes or being obese, etc.

      You may argue that the gov’t will not use the money to promote healthy foods – which would be consistent with the goal of such a tax – and that is a legitimate criticism.

      You are correct that the problem is lack of exercise – and there are a number of initiatives to promote exercise in the form of walkable and bike-able cities and towns – but these are long term investments that will bear fruit in time – not immediately.

      We have an immediate problem and a major health crisis with growing obesity levels. Taxing the foods that are major causes of that crisis is being responsible and accountable for our behavior, assuming the tax money goes to promoting healthy foods and exercise.

      That should appeal to your conservative viewpoint.

  • YouAreTooKind

    How about starting by NOT subsidizing corn? That corn is only making climate change worse and our waist lines thicker. Thoughts? Then we could think about subsidizing small/med farms that grow fruits and/or vegetables.

  • http://pulse.yahoo.com/_LLH7SFRBBDZ54YLFVP6POB6XAI ANNA

    People can actually buy soda, chips, etc with food stamps. If you really want to change peoples food choices to be more healthy, this is where to do it. Use the WIC programs list of acceptable foods for food stamps.

    • YouAreTooKind

      Many people who use food stamps live in “food deserts”. So I don’t think this is a viable option until we address the problem of neighborhoods not having acceptable grocery stores.

    • http://www.facebook.com/SolaceSoulless Amanda Renee

      You definitely cannot purchase soda and chips on WIC in Texas. Juice and milk only.

      • http://pulse.yahoo.com/_LLH7SFRBBDZ54YLFVP6POB6XAI ANNA

        Exactly. That’s why I suggested we use the WIC list of acceptable foods for the Food Stamp program.

        • Response Two

          I suggest you find out how much food stamp money people get to live on (per week) in your area and only spend that amount per week on your food bill for two months (no cheating). Then make the statement “use the WIC list of acceptable foods for the Food Stamp program.” Also, if you live in Texas, invite your government reps to do the same. Or, invite ALL of your reps wherever you live to work full-time at Walmart for a year.

  • vito33

    The ‘locavore-organic-sustainable-free range-eco friendly’ mini-farm operations should be lobbying for some kind of subsidy. They want to farm on a few acres in the northeast, for a few months out of the year, and compete with farmers in the west with hundreds of thousands of acres and a 12 month growing season.

    They try to get us locals to subsidize them by appealing to peoples’ desire for exclusivity and ultimate healthfulness, no pesticides, etc., but in my opinion it’s mostly a scam. Their stuff is worth nowhere near the prices they charge for it. I buy all my fruits and veggies elsewhere.

    http://www.reuters.com/article/2012/09/03/us-organic-food-idUSBRE8820M920120903

    (The part about mini-farmers lobbying for subsidies is sarcasm. They don’t deserve any subsidies from anybody. They should drive their prices closer to Market Basket or Haymarket Square wholesale prices, or find something else to do.)

    • SamanthaJess

      Why shouldn’t local farm operatives who grow fresh, local food; who are responsible farmers when it comes to sustainability of the land; and whose crops are transported a fraction of the distance of their large, subsidized brothers (therefore cutting down on emissions) get subsidies? What about cattle raised humanely and fed the food that they are actual evolved to eat instead of corn? Why are there hefty subsidies for soy and corn (which are turned into ultra processed food products) and so few for other crops? It’s not about the space, it’s about how you treat the land and how the food raised is pumped back into society and how much nutritional and environmental “bang for the buck” you get. Food that is healthy, is nutritious and that resembles its original form, should not be prohibitively expensive!

  • marybethsimmons

    Seriously people, do you think these government hacks care about your health? All they’re trying to do is find popular items to tax and get more money from peoples pockets. You left wingers are so gullible.

    • YouAreTooKind

      I’m not gullible. I know that the government cares about having to cover the cost of my diabetic drugs and lung cancer treatment. Oh, and not to mention having armed forces that can run and jump without having a heart attack. I am very realistic and not gullible but thanks for your kind words anyway they are so constructive! That was sarcasm, in case you need translation.

      • jo

        You are making jokes about cancer. You are worse than gullible.

    • jefe68

      In the paraphrase Malcolm Tucker: You’re so dense light bends around you.

    • durham kid

      Marybeth: it is completely unnecessary to be rude in your post.

      YouAreTooKind has a great response to your answer – it is all about the cost in the end.

      It does not matter in the end that gov’t cares about your health because it is going to cost them (and not because, like your friends and family, they want you to enjoy a long, healthy life). The vast majority of corporations have absolutely no interest in preserving your health – other than to keep you alive enough to consume.

      So I have more faith in gov’t than I do in most corporations

  • J__o__h__n

    Why is dark chocolate going to be taxed and hot dogs, ice cream, chips, cheetos, etc not going to be?

    • Rocky

      Who told you that? I mean its stupid to tax dark chocolate and not tax hot dogs,etc. I am just wondering where did you read that?

  • Reasonable?

    I like Polar carbonated waters which are sugar free.

    Would that be taxed?
    Why not tax by glycemic index?
    That could be used for liquids and solids.

    Isn’t the sugars that we’re trying to get at?

    • durham kid

      And if you consume water, you tend to consume less soda – the soda gets displaced.

      Then there is the concern about buying bottled water – moving it around in trucks with all the associated energy consumption, air pollution, etc. I would love to get a home water carbonating kit – but the only ones I have found are just as expensive as buying carbonated water.

      So many of these problems have many different sides – I think most people get overwhelmed and don’t want to think/hear about it. That does not solve the problem though.