State Snack and Soda Taxes from 2003–2007: A Public Health Policy Approach to Discouraging Consumption of Snacks and Sodas

Presented at the American Public Health Association annual meeting, Washington, D.C., 2007

STUDY OVERVIEW

ACKNOWLEDGMENTS

DISCUSSIONRESULTS

Background

Obesity is a complex health issue associated with many preventable causes of death such as heart disease and stroke. In 2005, 23.9% of U.S. adults were obese and obesity prevalence increased in all states from 1995–2005.1 Consumption of sugar-based soft drinks and snack items contribute to weight gain and obesity in both juvenile and adult populations.2-4

It is not only the individual who suffers from the effects of obesity, but society as a whole. U.S. medical expenditures for obesity-related disease and illness were an estimated $75 billion in 2003 dollars, with additional costs in lost productivity.5 Taxpayers are responsible for financing about half of obesity-related medical costs through Medicare and Medicaid.5 As obesity rates and obesity-attributable medical expenditures for both children and adults continue to climb, public health advocates search for effective strategies to help fight this battle. It is estimated that a national tax of 1 cent per 12-ounce soft drink would generate about $1.5 billion annually and similar revenues could be generated from a snack tax.6 Recent data on the state-level sales tax variance for sodas and snack products are not readily available.

Study Aims1. To compare state sales tax rates for sodas and

snack products sold in two locations—grocery stores and vending machines.

2. To identify the extent to which states “disfavor” sale of soft drinks and snacks by taxing them at a higher rate than food products generally.

Data Sources and Methods

Data Sources• State tax rates: Westlaw and Lexis-Nexis

statutory and administrative law databases

• Food tax rates obtained from the Federation of Tax Administrators

Methods• Primary legal research for the state tax rates for

sodas and snack products

• Telephone verification by state tax administrators

• On-site field verification in 5 states where information from the state conflicted with state laws

Prior reports have stated that no state currently levies a tax on snack products;7,8 however, the data reported herein dispel that myth. In fact, our research confirms that 40 states do, in fact, impose some type of sales tax on sodas and/or snack products and, in several cases, that these taxes are higher than the standard state sales tax for food (i.e., disfavored tax status).

Evidence is emerging on the relationship between taxation and obesity rates on consumption of soft drinks and snack products with some studies indicating strong, positive associations between state taxation and changes in obesity prevalence7 and other studies estimate that the demand for snack products would only change by a negligible amount at lower tax rates.8

At the same time, evidence from other public health areas indicates that food pricing is associated with consumption patterns9 and that higher cigarette10 and alcohol11 tax rates are associated with reduced consumption and reduced consequences associated with consuming those products.

What is not known is how the states are using the revenue generated from the sales taxes reported in the current study.12 In other words, are the sales taxes being used for general revenue generation or are they dedicated for some other purpose?

This study did not examine the extent to which the states dedicate a portion of their sales tax to fund programs specifically targeting obesity and overweight issues (akin to what has occurred in the tobacco arena relative to dedicated excise taxes). This is an area deserving of future study.

STUDY LIMITATIONS

• Examined cross-sectional data for two years, 2003 and 2007.

• Examined only one aspect of state taxation of sodas and snack products. Other types of taxes include license and privilege fees applied to

manufacturers, distributors, and wholesalers.

• Did not attempt to link sales tax data to consumption rates or overweight and obesity prevalence; these are the subject of future study.

This study was conducted by The MayaTech Corporation for the University of Illinois at Chicago as part of the Robert Wood Johnson Foundation-supported ImpacTeen project (PI: Frank Chaloupka, Ph.D.).

Vended items are taxed at a higher rate than grocery items

REFERENCES1. Blanck HM, Dietz WH, Galuska DA, et al. State-specific prevalence of obesity among adults—United States,

2005. Morbidity and Mortality Weekly Report 2006 September 15;36(55):985-8.

2. Malik VS, Schulze MB, Hu FB. Intake of sugar-sweetened beverages and weight gain: a systematic review. Am J Clin Nutr 2006 August 1;84(2):274-88.

3. Center for Science in the Public Interest. Dispensing Junk: How School Vending Undermines Efforts To Feed Children Well. Washington, DC: CSPI; 2004.

4. James J, Thomas P, Cavan D, Kerr D. Preventing childhood obesity by reducing consumption of carbonated drinks: cluster randomised controlled trial. BMJ 2004 May 22;328(7450):1237.

5. Finkelstein EA, Fiebelkorn IC, Wang G. State-level estimates of annual medical expenditures attributable to obesity. Obesity Res 2004 January 1;12(1):18-24.

6. Jacobson MF, Brownell KD. Small taxes on soft drinks and snack foods to promote health. Am J Public Health 2000;90(6):854-7.

7. Kim D, Kawachi I. Food taxation and pricing strategies to "thin out" the obesity epidemic. Am J Prev Med 2006 May;30(5):430-7.

8. Netscan's Health Policy Tracking Service. State Actions to Promote Nutrition, Increase Physical Activity, and Prevent Obesity: A 2006 First Quarter Legislative Overview. Falls Church, VA: Thomson West; 2006 Apr 3.

9. French SA. Pricing effects on food choices. J Nutr 2003 March;133(3):841S-3S.

10. Chaloupka FJ, Warner KE. The economics of smoking. In: Cuyler AJ, Newhouse JP, editors. The Handbook of Health Economics. New York: North-Holland, Elsevier Science B.V.; 2000;1539-627.

11. Chaloupka FJ. The effects of price on alcohol use, abuse, and their consequences. In: Bonnie RJ, O'Connell ME, editors. Reducing Underage Drinking: A Collective Responsibility. Washington, D.C.: National Research Council, Institute of Medicine, The National Academies Press; 2004; 541-64.

12. Kuchler F, Tegene A, Harris JM. Taxing snack foods: manipulating diet quality or financing information programs? Review of Agricultural Economics 2005;27(1):4-20.

Shelby Eidson1, J.D.; Jamie Chriqui1,2, Ph.D., M.H.S., Hannalori Bates1, B.A, Frank Chaloupka2, Ph.D. • 1The MayaTech Corporation 2Institute for Health Research and Policy, University of Illinois at Chicago

Average sales tax rates by product and sales location

Number of states with sales taxes on sodas and snack products by location

Soda and snacks are taxed at a higher rate than food

0

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

SodasCandyGumIceCream

PopsiclesMilkshakes/BakedGoods

Chips/Pretzels

0

1.0%

2.0%

3.0%

4.0%

0.5%

1.5%

2.5%

3.5%

4.5%

SodasCandyGumIceCream

PopsiclesMilkshakes/BakedGoods

Chips/Pretzels

2003

2007

1.33%

3.13%

1.33%

3.22%

1.55%

3.22%

1.78%

3.44%

2.81%

3.63%

2.90%

3.60%3.44%

3.97%

1.20%

3.13%

1.20%

3.24%

1.42%

3.24%

1.63%

3.45%

2.70%

3.74%

2.87%

3.71%

3.43%

4.02%

0

5

10

15

20

25

30

35

40

SodasCandyGumIceCream

PopsiclesMilkshakes/BakedGoods

Chips/Pretzels

VendingGrocery

0

5

10

15

20

25

30

35

40

SodasCandyGumIceCream

PopsiclesMilkshakes/BakedGoods

Chips/Pretzels

VendingGrocery

2007

34

39

30

36

30

37

16

32

20

35

18

33

16

33

34

39

30

37

29

38

15

32

19

35

17

33

15

33

0

5

10

15

20

25

30

SodasCandyGumIceCream

Milkshakes/BakedGoods

Chips/Pretzels

VendingGrocery

20

28

16

26

14

26

0

20

4

23

0

21

Number of states with higher sales tax than food generally by product and sales location, 2007

0

5

10

15

20

25

30

SodasCandyGumIceCream

Milkshakes/BakedGoods

Chips/Pretzels

19

VendingGrocery

19

25

15

24

14

24

0

5

22

0

20

Number of states with higher sales tax than food generally by product and sales location, 2003

The following states do not impose a sales tax on candy for vending/grocery sales: AK, AZ, CO, DE, LA, MA, MI, MT, NH, NV, OH, OR, and PA.

The following states do not impose a sales tax on sodas for vending/grocery sales: AK, AZ, CO, DE, LA, MA, MI, MT, NH, NV, OR, and VT.

Sales tax rates for sodas, 1/1/07

8% 8%7% 6% 5% 4% 3% 2% 1% 0 1% 2% 3% 4% 5% 6% 7%

Sales tax rates for candy, 1/1/07

Vending Grocery

MS

TN

RI

NJ

WA

MN

TX

CA

KY

IN

ID

FL

CT

AR

DC

NE

KS

WV

WI

SC

NM

ND

ME

MD

IA

OK

NC

VA

SD

NY

HI

GA

AL

WYUT

MOIL

8% 8%7% 6% 5% 4% 3% 2% 1% 0 1% 2% 3% 4% 5% 6% 7%

Vending Grocery

MS

RI

NJ

WA

MN

TX

IL

CA

TN

PA

KY

IN

ID

FL

CT

AR

DC

OH

NE

KS

WV

WI

SC

NM

ND

ME

MD

IA

OK

NC

WY

VA

SD

NY

HI

GA

AL

UT

MO

VendingGrocery

Food tax 1.33%

VendingGroceryFood tax 1.20%

2003