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October 12th, 2009

Should Washington Tax Soda?

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Many Americans (us included) realize that the government’s rampant spending is likely to mean a tax increase — in one form or the other — sometime in the near future. As both a partial solution to prop up state budgets and to reduce healthcare costs, many Americans are behind a push to increase the tax on soda and other beverages with added sugar.

Recent estimates project that states could generate up to $10 billion if Washington enacted a national tax on soda and similar beverages:

Even as 48 states and the District of Columbia are facing grim budget shortfalls, only 25 states currently impose special taxes on soda and other beverages with added sugar, and all of those taxes are very small. And according to a new paper from the Center for Science in the Public Interest, states could generate a total of more than $10 billion per year by levying a tax of 7 cents per 12-ounce can of Coke or Mountain Dew. If implemented by Congress in the form of a national excise tax, that $10 billion could make an important contribution toward paying for health coverage for all Americans.

However, the critics argue that Federal tax codes should not be used to facilitate “social engineering”:

“The tax code should not be used as a tool for social engineering. Nor should it be an instrument for penalizing individuals’ personal food choices — choices that some government officials find distasteful,” said J. Justin Wilson, senior research analyst at the Center for Consumer Freedom.

“Taxing soda pop is another paternalistic policy idea, which holds that politicians and government regulators, rather than individual citizens, should decide every aspect of what, where and when we eat.”

Just as they insisted when states wanted to increase the tobacco tax, medical officials say, despite the impact to state revenues — that the country’s health is at stake, and they have the studies to prove it.

To the dismay of many health officials, recent drafts of the healthcare reform to come out of Washington haven’t included any provisions pertaining to the “soda tax.” If the increased soda tax has a chance to become law, some say the soda increase, just as with the tobacco increase, will be relegated first to the state level.

Readers, we’ll leave the final thought here up to you — is it fair that all states may have to increase their tax on soda?

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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