The D.C. Council yesterday in voting on the District’s annual budget dumped a proposed “soda tax” of one percent per ounce in favor of levying a six percent sales tax on soft drinks in order to pay for recently approved “Healthy Schools” legislation.
What, you might be asking, is the difference between these two approaches to taxing sodas?
The beverage industry vigorously campaigned against the 1-cent excise tax on sodas because it would have raised the shelf price that consumers see when they purchase soft drinks. The sales tax of six percent, by contrast, appears only on the sales receipt after beverages have been purchased.
Although the industry also opposed the sales tax, it brings the District in line with neighboring Maryland, which already taxes soft drinks at six percent. Virginia levies a much lower 2.5 percent sales tax.
D.C. council members were more comfortable with the traditional sales tax approach because it is already familiar, in contrast to the more progressive excise tax, which was aimed not only at raising money to improve food served in the District’s public schools, but also was seen as a weapon to combat obesity by making sugary sodas more expensive.
The penny-per-ounce excise tax would have only applied to sugar-sweetened beverages. Diet drinks, calorie-free drinks, juices (with at least 70% juice), milk, coffee, and tea would have been excluded. The six percent sales tax applies also to artificially sweetened beverages, including diet and zero-calorie drinks, sports drinks and energy drinks. It will not apply to beverages containing milk, coffee, juice or tea.
The one-cent excise tax also had a cap of 30 cents per container.
The six percent sales tax is projected to raise more revenue–$7.92 million annually–than the penny-per-ounce tax on sugar-sweetened beverages–$6.3 million. Costs associated with the “Healthy Schools” initiative are expected to run about $6.5 million per year.
But the “soda tax” may not be dead. An aide to Councilmember Mary Cheh (D-Ward 3), who authored the “Healthy Schools” legislation, said last night she will continue to press for the one-cent-per-ounce tax on sugary beverages sold in the city. “Because the obesity epidemic is such a enormous health crisis in the District (73% and 72% of residents in Ward 7 and 8 are overweight or obese!), Councilmember Cheh plans to continue to push for a penny-per-ounce excise tax because it is a good health policy.”