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States with Soda Taxes 

In the past, we’ve devoted a bit of time to discussing “sin taxes” as a general concept.  We’ve identified and discussed several specific sin taxes from around the nation. Sin taxes serve multiple purposes.  For one, they are an additional source of revenue for state coffers.  They also offset some of the costs placed on society by the vices with which they are associated.  Moreover, they proactively deter some individuals from consuming the vices to which they’re linked.

As we’ve discussed, while the logic behind sin taxes is clear, these taxes are never without controversy.  Some argue that sin taxes, even though well-intentioned, cause more harm than good.  That’s because they negatively impact those with relatively disadvantaged socioeconomic backgrounds.  Others argue that sin taxes have a net positive impact due to the revenues generated and deter people from harmful behaviors.   This blog post will focus on a particular type of sin tax:  state soda taxes.

The state soda tax is one of the most common types of sin taxes.  Given our nationwide health crisis, particularly with obesity, it seems likely that soda taxes (or the “sugary drink tax” in some locales) will remain a a part of U.S. taxation for quite a while.

The Illinois Soda Tax

In November, 2016, lawmakers in Cook County, Illinois – the county which includes the city of Chicago – voted to implement one of the nation’s largest tax on soda and sugary drinks. The legislation imposed an additional one cent per ounce on all sugary drinks sold within the county. The tax was passed with great fanfare for both budgetary and health considerations.  Surprisingly, though, the measure was repealed only about two months later. After experiencing numerous operational issues, as well as heated opposition from soda industry lobbyists and other activists, county lawmakers struck down the tax and decided to look elsewhere for solutions to state problems.  

The Cook County soda tax demonstrates clearly that any attempt to tax sugary drinks will be bogged down by both difficulties and organized opposition. No matter how reasonable any given soda tax may seem, particularly when viewed from a localized perspective, the big players in the soda industry will always do whatever is necessary to protect their economic interests. 

Pennsylvania 

Back in June of 2016, Philadelphia followed the soda tax model advanced by the city of Berkeley, California.  It passed a city-wide tax on both soda and other sugary drinks. The tax consisted of a 1.5 cent per ounce levy on soda; this in addition to the 8% tax already applied to such drinks within the Commonwealth of Pennsylvania. The tax went into effect on January 1, 2017, and, among other goals, was designed to raise funds for education and other public projects. In the original version of the tax, a total of three cents would be imposed per ounce of soda, but negotiations and compromises lowered that total down to the 1.5 cent mark.

Interestingly, Philadelphia’s soda tax survived a legal challenge in July of 2018 when opponents of the tax were unsuccessful in their attempts to strike it down. Opponents argued that the tax was unlawful because it amounted to “double taxation” on the same subject or persons.  The Supreme Court of Philadelphia disagreed, however.  It held that there was no double taxation since the party responsible for the tax is the distributor and not the consumer. 

Special Mention: The California Soda Tax

The State of California deserves special mention in this blog post.  California has soda taxes in place in several localities throughout the state.  Nonetheless, as of June, 2018, the Golden State has banned any further sugary drink taxes. This new proscription comes as something of a surprise to many political and economic pundits.  In part that’s because California’s soda taxes have shown success in reducing soda consumption. But the soda industry also plays a considerable role in California’s state economy.  Accordingly, some view the ban as responsive to the greater economic needs of California citizens. So while California has soda taxes on the books, its soda manufacturers can sleep soundly knowing that there won’t be any additional taxes of this sort until at least the year 2031. 

So there you have it.  The states referenced above have decided to take advantage of our soda drinking habits to line their pocketbooks. We can only speculate on the direction soda taxes will take in the future.  In some ways, the State of California acts as a socio-political trend-setter for the rest of our nation.  It may be reasonable to assume that other states will also place bans on soda taxes. Whatever the case, our readers can be certain that the lawyers at Mackay, Caswell & Callahan, P.C., will keep up-to-date on the most important developments. Our New York City tax attorneys spend a great deal of effort to keep up with current issues in tax, finance and business.  That way, we can better help and satisfy our clients needs. If you have a tax or business matter for us, reach out!  We’re happy to help.

Image credit: Jamie