Excise Taxes: Is Sugar the New 'Sin'?

Washington Matters

Excise Taxes: Is Sugar the New 'Sin'?

Folks who represent the food and beverage industry are fighting an all-out war against a federal excise tax on sodas, fruit drinks, sports drinks and other sugared beverages. They are determined to make sure that Congress doesn't approve such a tax to help offset the cost of health care reform legislation, and they even launched an advertising blitz costing a reported $2 million to make their point. There's just one problem: No major health care bill pending in Congress includes such a tax.

So far this year, the only hint that Congress would consider a sugared beverage tax surfaced back in May, when the Senate Finance Committee included the levy in a set of possible options to pay for overhauling the health care system. The idea behind throwing it on the table is, apparently, this: With obesity a growing concern, making people pay extra to buy drinks containing sugar would make sense in the context of reforming the health care system. When the Finance panel unveiled its bill, however, no beverage tax was included, and the idea hasn't surfaced in any official way since then.

Yet the ad compaign continues. What's going on here? Is the food and beverage industry simply paranoid? It might seem that way, but it's also possible that they're looking ahead. Consider this: Revenue raisers have a way of popping up again and again, and eventually making it into law, even if they have been struck down a time or two. A good example is the requirement that brokers report the basis of securities sold by their customers, to help the IRS determine whether they are reporting enough in capital gains from those sales: That idea kicked around for more than two years before finally being OK'd by Congress last October, and it will take effect for securities purchased after 2010.

It's also possible that companies producing food and drink products see the prospect of the camel poking its nose under the tent. If sugar is deemed to be the new "sin" worthy of a sin tax, why would politicians stop at an attack on beverages? What might be next? Candy? Cookies? Ice cream?

Yes, sweetened drinks did escape this time around, but Congress will again be on a major hunt for revenues next year, to pay for legislation that continues the Bush tax cuts -- set to expire at the end of 2010 -- for middle income taxpayers. And a sugared beverage tax may again be part of the mix: Just a few weeks ago, Men's Health magazine released an interview with President Obama in which he said the idea is worth exploring. So while the industry's effort to quash the tax may look like overkill, they know they're not out of the woods yet. Not by a long shot.