Taxing soda could hit lowest-income families hardest, study says

As more budget-strapped states and cities consider taxing soda pop, the less educated and lower income households could be hit hardest, according to a new study published by the Federal Reserve Bank of Chicago.

Iowa taxes soda as general merchandise, and most other states tax such sweetened beverages as either food or general merchandise. Many states and a few cities are now also considering special taxes on soft drinks based on the premise that they contribute to growing national health epidemics of obesity and diabetes.

The Center for Science in the Public is supporting the drive to tax soda. It says several scientific studies have linked soft drinks to weight gain, and that frequent consumption is also linked to osteoporosis, tooth decay and erosion of tooth enamel. Weight gain is a risk factor for heart attacks, strokes, type two diabetes and cancer, the group says.

Legislation to expand soda taxation was filed in 17 states from 2009 through 2010 according to the Rudd Center for Food Policy and Obesity at Yale University. Only Colorado and Washington passed new legislation, but with many states facing budget shortfalls the soft drink taxes are expected to come up again in 2011.

Iowa has an economic stake in the outcome of the tax debate as a major producer of high fructose corn syrup, which has largely replaced sugar as the leading non-diet sweetener in soft drinks. High fructose corn syrup production in the United States uses 460 million bushels of corn, according to the Iowa Corn Growers Association. A 100 million bushel reduction in demand for corn to make the sweetener would cost U.S. corn farmers an estimated four cents on every bushel they sell, the group said.

A study published in the March Chicago Fed Letter found that soda taxes will affect people differently depending on how much soda they purchase, where they buy it, the form of the soda tax, and whether they buy it with SNAP benefits, the federal program formerly known as food stamps.

The study found Americans living below poverty level obtain 9 percent of their daily calorie intake from “sugar sweetened beverages,” compared to 5.6 percent for all Americans. Americans with less than a high school education obtained 7.4 percent of their calories from sugar sweetened beverages.

Sugar sweetened beverages were a significantly higher percentage of household food spending for less educated Americans than college graduates.. College grads on average spend 1.9 percent of their food budget on soft drinks, versus 3.22 percent for Americans without a high school diploma.

The affect of soda taxes on consumption could depend heavily on the type of tax, the study found. Taxing soda based entirely on price could cause Americans to switch from cans to less expensive brands or larger containers such as two-liter bottles, the study found, because large containers typically cost less per ounce.

Taxing soda by the ounce could cause consumers to switch to beverages with a higher sugar content, the study found.

One way some tax proposals try to address the possible shifts in spending is by basing the tax solely on sugar content, according to the study, authored by Chicago Fed Senior Economist Leslie McGranahan and Northwestern University Associate Professor of Human Development Diane Whitmore Schanzenbach.

The Corn Refiners Association and other industry trade groups have tried to combat the claims that high fructose corn syrup is directly linked to growing obesity. The groups say there's no dfference between the way high fructose corn syrup and other food-based sweeteners such as sugar affect the body, and that the primary difference is that high fructose corn syrup is more affordable.

Iowa Corn Growers Association spokeswoman Mindy Williamson said the association hasn't taken a formal position on taxing soft drinks, although it generally opposes taxes that unfairly penalize corn producers.

The Center for Science in the Public Interest says a federal excise tax of one cent per 12-ounce serving of soda would raise about $1.5 billion per year, while taxing it at $8 cents per 12-ounce serving would raise $11 billion. It prodposes using the tax proceeds to fund education programs supporting healthier lifestyles.

Consumption of high fructose corn syrup has declined since its peak in 1999. The USDA estimates per capita sugar consumption in 2008 was 47.2 lbs per year and 37.8 lbs per year for high fructose corn syrup.

As high fructose corn syrup use increased in the United States, it replaced sugar in various foods and beverages on a nearly one-for-one basis, as the chart (below) illustrates. Yet because sugar and high fructose corn syrup share a common composition, the ratio of fructose-to-glucose in the diet has remained relatively unchanged over time. This means that sugars in the foods and beverages we consume is nearly the same today as it was 30 years ago, before high fructose corn syrup was introduced.

“As a corn grower, I know that what I am producing is safe and nutritionally the same as sugar. It has been scientifically proven to be safe and natural, it has the general properties of sugar, and the truth that should be peddled to consumers is their ability to control their calorie intake and their appetite for misinformation. ”

For more information on high fructose corn syrup, visit www.sweetsurprise.com

What does high fructose corn syrup mean to Iowa's corn crop?

High Fructose Corn Syrup constitutes a 460 million bushel corn market. A 100 million bushel loss of corn use for HFCS would cost U.S. corn farmers an estimated four cents on every bushel they sell.

For Iowa, the cumulative loss would be more than $87 million.

Average per capita spending on soda – by education

• Less than high school: $130.96
• High school grad: $141.79
• Some college: $147.02
• College grad: $141.71

Average daily caloric intake from soda – by education

• Less than high school: 139
• High school graduates: 159
• Some college: 131
• College graduates: 78

Source: Analysis of Bureal of Labor Statistics 2008 Consumer Expenditures Survey by Fed Senior Economist Leslie McGranahan and Northwestern University Associate Professor of Human Development Diane Whitmore Schanzenbach