Could Soda Tax Fill Budget Hole?

Republican lawmakers have vowed to close the budget hole without a new tax. But that hasn’t stopped Sen. Eddie Lucio Jr., D-Brownsville, from proposing a penny per ounce tax on soft drinks.

At a Senate Finance hearing this morning, he suggested his measure could bring in billions of dollars to the state, while curbing consumption of sugary drinks linked to childhood obesity and diabetes.

“I have become convinced we cannot cut our way out of the financial hole we find ourselves in without devastating the services millions of Texans rely upon,” he said.

But while public health experts testified that the measure would dramatically curb the purchase of soft drinks, and limit the calories and caffeine young people consume, representatives from the beverage industry questioned the data, and said there’s no simple solution to the obesity epidemic.

“Common sense tells us, and science proves, that taxes don’t necessarily make people healthier,” said Bill McManus, director of government affairs for the American Beverage Association. “Making smart, educated decisions about diet and exercise do that.”

According to the Legislative Budget Board, SB 1004 would bring in more than $1 billion in the next biennium. Lucio said it would also likely curb consumption; studies show when soda prices rise by 10 percent, he said, consumption drops 8 percent. 

Steve Kelder, an epidemiologist with the University of Texas School of Public Health, said in the quantities sodas are being consumed, they’re “making our children sick.” Even daily consumption of diet soda has been linked to heightened risks of diabetes and obesity, Kelder said. “It’s reasonable to estimate a penny per ounce tax could reduce consumption by about 20 percent, and possibly more,” he said. “It might reduce the average person’s consumption by 10 gallons per year.” 

Alfred McAlister, a professor of behavioral sciences at UT’s School of Public Health, said while a soda tax would in theory be regressive — hitting hardest those in the lowest socioeconomic groups — its revenue would go to help those who need it most. “The soda tax won’t be [regressive] if the funds are used in ways that help people on the lower end of the income spectrum,” he said.

But McManus said there are other solutions than a tax to curbing consumption of sugary drinks, and that beverage companies have gone to greater lengths to provide a variety of sugar free options. And Royce Poinsett, an attorney representing the National Association of Theater Owners in Texas, argued that while all taxes are unpopular, “this tax is particularly unpopular.” He said there’s no direct evidence showing that a “tax on soda beverage would make people healthier.”

Lucio said he knows firsthand how unpopular such a tax could be. “I’m having trouble getting support from my grandchildren,” he said. “But I think in the long run, they’d rather have the money to keep paying teachers.”