October 3, 2010

Why the New Soda Tax is Wrong for the District of Columbia

• By Living District
• No Comments
• No TrackBacks

The District of Columbia new beverage tax goes into effect today.

We can all understand that the District of Columbia is having difficult financial times. In fact the DC budget shortfall could hit 175 million dolars. That said, this tax is all wrong for DC and here's why.

The beverage tax is a regressive tax

Simply put a a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich -- there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or income. Given the fact that three out of ten children in DC are living in poverty, any tax that deliberately puts a greater burden on the poor, and specifically a tax that makes it harder for the poor to buy groceries, is simply unacceptable.

Not all regressive taxes are necessarily bad.

The beverage tax is not the only regressive tax recently imposed by our local government. The city has introduced a regressive bag tax and increased tobacco taxes. In both of these cases, one can argue these regressive taxes have a positive impact. In the case of tobacco taxes it is pretty clear that higher cigarette taxes reduce smoking and save lives. And in the case of the bag tax, the city is reducing the use of disposable bags in our community and their environmental impact..

But what about the beverage tax? Does it have any redeeming value for residents or our community at large or is it just another tax that puts a heavier burden on the poor?

While some beverages taxes encourage healthier choices, our beverage tax does not.

If the beverage tax in some way encouraged District residents to make healthy choices, thereby reducing our healthcare costs, it could be justified. Ward Three City Council Member Mary Cheh intended to do that, by taxing soda and sugar-added drinks and excluding diet beverages. The USDA thinks this could have a pretty big impact. But sadly, the tax as it exists does not do so. Our beverage tax applies to sports drinks, diet drinks and sodas, making no distinction between the three. Further, it does not apply to fruit juices which contribute to diabetes, a serious concern for many DC residents.

The District Can Do Better

The beverage tax is wrong for DC. So what should come next? For starters, if we want a beverage tax that will have an impact on the health and well being of District residents, we should scrap the current law and start over.

Further, we need to all understand that our budget shortfall will never be solved (and should not be solved) by regressive taxes that shift the burden to the poor. Now more than ever, the city council needs to revisit City Council Member Jim Graham's call for progressive tax reform.