- As soda taxes continue to gain popularity, experts question whether legislators should base these taxes on product volume, as is more common, or on sugar content, which they say could be more effective, according to a report from the Tax Policy Center.
- Taxes based on sugar content may be more successful in lowering consumption and may also better encourage manufacturers to reduce sugar levels in their products.
- A broader volume-based sales tax for all soft drinks, however, could be a more efficient revenue driver.
Governments are beginning to utilize taxes to both discourage consumption of sugary beverages and generate revenue for the local economy. The latter has become a more popular central vision for soda taxes because this goal seems to resonate better among consumers and legislators than a public health-centric angle on its own.
For this reason, it's practical for governments to adopt the broader volume-based sales tax to generate the revenue these soda taxes promise. And as more legislators use this approach to push support for soda taxes among their constituents, the volume-based sales tax will likely continue to be the preferred calculation method.
But that's not to say an approach based on sugar content doesn't have its own benefits, and this strategy could become more popular going forward. This may be an approach legislators and industry lobbyists hadn't yet considered, so research from third-party institutes could improve visibility for this strategy and draw attention to its unique benefits over volume-based taxes.
A sugar content-based tax better targets the largest contributors to consumption — and potential subsequent health complications — among consumers. This could appeal to manufacturers that produce beverages with a lower sugar content but pay the same taxes as more sugary drinks because of the similar volume of their packaging.
If soda taxes are inevitable, industry lobbyists may switch gears to fight for this type of tax if it means certain manufacturers will be less affected. This type of tax calculation could also incentivize brands that have worked to reduce sugar content in their beverages, as major producers like PepsiCo have committed to doing.