Tuesday, May 18, 2010

Mary Cheh's Soda Myth

Counclimember Mary Cheh's web site touts 10 myths about DC's proposed soda tax.

Unfortunately, all she does is what politicians do best: spin. Let's take on a few of her myths. But before we begin, let's address the big white elephant in the room that the soda-tax proponents never seem to remember.

DC is proposing a soda tax more than ten times higher than our beer tax, more than four times higher than our wine tax, and barely lower than our hard liquor tax.

DC's alcohol tax rates are 9 cents per gallon of beer (or 7/100 of a cent per ounce), 30 cents per gallon of wine, and $1.50 per gallon of liquor. The soda tax of 1 cent per ounce is equivalent to $1.28 per gallon.

If this tax passes, it will really mean just one thing: the liquor lobby is stronger than the soda lobby. I can think of no greater irony in a city with a massive alcohol abuse problem than taxing soda at a rate over ten times higher than beer.

But on to Mary's Myths.

Supposed Myth: The soda tax would tax ALL beverages.
Mary's Myth: Only sugar-sweetened bottled beverages would be taxed. Diet soda, non-caloric beverages, milk, juice, and water would be excluded.

Remember back in 1776 where we got fed up
with them stupid kings taxing our cup of tea?
I guess those who forget their history
are doomed to repeat it.

First of all, that's incorrect from the outset, since most beverages are sweetened with corn syrup, not sugar.

Second, the legislation only excludes drinks that are more than 70% juice by volume. Have you ever looked at the actual juice content of a bottle of fruit juice? Unless you're buying orange or apple juice, it's probably under 30%. Many juices are way too strong to drink straight. Ironically, those that are frequently considered the most healthful (like pomegranate and cranberry) are in this category.

Finally, this tax (draft legislation) covers all beverages except those specifically excluded. It includes coffee and tea if a sweetener is added at the point of sale.

That's right. They finally did it.

They taxed our cup of tea.

Think about that last one for a minute, by the way. Coffee and tea are taxed if sweetener is added at the point of sale. Do any coffee shops actually ask you if you want sugar in it, rather than you putting it in yourself? So basically Starbucks will start charging you 20 cents for a pack of sugar, possibly making DC the only place in America where a cup of drip coffee could cost you over $3.00.

Supposed Myth: A soda tax would send grocery sales to Maryland and Virginia.
Mary's Myth: Because soda taxes cause consumers to substitute goods, residents would continue to purchase groceries in the District. Funds raised by the soda tax would build more grocery stores and bring more business to the District.

Well, that is really quite an astounding presumption. Unlike "plastic bags," where you can easily substiute something just as functional, most people won't suddenly decide they prefer Diet Coke or seltzer water to Coke because of a tax.

Personally, I think sugar is a lot better for you than artifical sweeteners that have been proven to cause cancer, too, but that's just me.

Luckily, we just had a test case for this exact situation, involving a product with no substitute. DC raised it's cigarette tax by 50 cents per pack in October, making it the highest in the region. In FY2009, DC earned $37.6 million in revenues from smoke tax. They projected $45M when they raised the tax, obviously unaware that consumers tend to buy things where they are cheaper when it's just as easy to do that.

On Feb. 24, the CFO announced that cigarette tax revenues were (shocker) significantly off and they were revising the revenue projection to $30M, $7 million less than before the tax.

DC is 65 square miles, and has a border about 30 miles long. This means that probably about half of all DC residents even live within a mile of the border of VA or MD, and tons of them work there too. Now I'm no rocket scientist, but I'm guessing it's pretty damn easy for a large part of DC residents to choose to shop in Maryland or Virgina.

I'm guessing that the 50 cent tax didn't actually cause a 50 percent drop in smoking in DC, and that the money's just going to our neighbors instead.

Given that the soda tax is pretty substantial, I mean, we're talking 64 cents for a single 2-liter bottle of soda, or $2.88 for a case of cans, you don't think there's any reason this would drive business out of DC?

But Maryland and Virginia also tax soda don't they?

Yes, they do.

Maryland taxes soda at a rate of 6%.
Virginia’s rate is 1.5%

For a 99-cent bottle of Rock Creek Soda, DC's proposed tax rate is about 65 percent.

Say that again.

Sixty Five Per Cent.

I will leave you now, and return to some more of Mary's Myths later.


Jon Mandel said...


This a great post and really sheds light on the fact that the majority of dc residents are opposed to such a high taxation. Taxes are not the way to fight obesity or pay for new legislation when as a whole we are faced with hundreds of millions of dollars less in the city budget than the year before. I am currently working on David Hedgepeth's campaign and he is running against Mary Cheh for the Ward 3 seat of city council. If you are interested in finding out more about the candidate, I strongly urge you to check out the website http://daveforward3.com/

Please email me if you have any questions or would like to get involved with the campaign jonsmandel@gmail.com

Alex said...

The American Beverage Association, and its simulated grassroots spinoffs that have been set up to oppose this, thank you for your time and effort on their behalf.