Health & Human Services

Soda Taxes Aren't Job Killers

A new study in the American Journal of Public Health finds taxes on sugary drinks cause no net harm to the job market and raise government revenues substantially.
by | February 13, 2014
Two-liter bottles of Coca-Cola products on the shelves at the Andronico's store in San Francisco, April 19, 2006. AP/Eric Risberg

A new study challenges the contention of the beverage industry that state and local taxes on sugary drinks hurt employment.

The study, appearing in the American Journal of Public Health, argues those claims are off base because they focus only on the effects within the industry, ignoring the economic activity that comes with people substituting lower-priced goods for more expensive products as well as new spending from tax revenues.

Public health advocates have long warned of a link between added sugar and a host of ailments, from Type 2 diabetes and obesity to heart disease and osteoporosis. The caloric intake of sugary beverages increased dramatically from 1988 to the mid 2000s, though consumption has dropped across all age groups in recent years. Some suggest raising taxes on sugary drinks in order to reduce consumption.

But the beverage industry pushes back against the emphasis on sugary drinks as a chief cause of America's obesity problem. The American Beverage Association notes that caloric intake of sugar-sweetened beverages on the whole is down 39 percent since 2000, while total beverage calories consumed in schools is down 90 percent since 2004. The bottom line, according to industry lobbyists: American obesity stems from the foods Americans eat and less on the beverages they consume.

In recent years proposals to tax those beverages have popped up statewide and locally in California, as well as Vermont, Hawaii, Massachusetts, Mississippi, New York and Rhode Island. None have been successful. In Maine voters passed a soda tax of 42 cents per gallon in 2008 just to repeal it two years later amid a major lobbying effort from the American Beverage Association. Voters in Washington state similarly reversed their legislature in 2010.  

As of the end of state legislative sessions in 2011, only four states had taxes specifically targeting sugary beverages, including Arkansas, Tennessee, Virginia, and West Virginia, according to the Tax Foundation.

The study’s authors acknowledge the movement's lack of success. Part of the problem is money: lobbying jumped $40 million between 2005 and 2009, they say, and the American Beverage Association spent $16.7 million repealing Washington’s law. It spent another $4 million defeating local measures in the California cities of Richmond and El Monte in 2012.

But a key pillar of support undermining those taxes has been economic, the authors argue. Beyond manufacturers and distributors, the American Beverage Association has argued small business owners, particularly grocers and convenience store proprietors, will suffer the most.

The American Beverage Association challenged the study but didn't directly address its conclusion.

"No matter how you look at it, soda taxes mean less jobs," the group said in a statement. "Americans have made it clear they don't support taxes and other restrictions on common grocery items, like soft drinks. Soda taxes have unintended consequences on middle-class jobs and small businesses. For these and other reasons, tax proposals continue to fail wherever they are introduced."

The authors contend their conclusion is too narrowly focused. They ran a simulation of the impact of 20-percent soda tax in Illinois and California—selected for regional differences—and found slight employment increases would occur, but the net effect would be close to nothing. The reason is simple: people choose to spend their money on other things, not to forego spending entirely.

“We find there are losses in the beverage industry, but when you’re talking about the whole economy suffering job losses, you can’t just talk about your own industry,” said Lisa Powell, health policy professor at the University of Illinois at Chicago and the study’s lead author. “Using job loss as a scare tactic for the economy overall is misleading.”

There’s also the consideration of new government revenue, which itself can produce jobs, the authors conclude. Under the study’s model, the tax would funnel another $500 million to Illinois and close to $1 billion to California.

Even with this new evidence, proponents of soda taxes have a long way to go, says Bruce Cain, a professor of political science at Stanford University. Voters aren't widely supportive because, unlike the case with cigarettes, they don’t see a clear external harm, he said. On top of that, the tax is viewed as regressive by advocates for the poor and the movement is disorganized.  

“We know how far academic spokespeople get in terms of being able to push the agenda,” he said. “They’re part of the picture—they provide the studies and basic understanding—but in the end it all gets translated into political arguments and it comes down to who’s on your side?”

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