State, local, and federal governments continually search for revenue streams to boost budgets and fund existing and new programs.  These elected officials rarely consider whether they should instead eliminate waste, fraud, abuse, and mismanagement to free up funds for new expenditures, which creates a vicious cycle of more taxes, more spending, and increased pressure on harried taxpayers.

Excise taxes, more commonly known as “sin taxes,” are a way to increase taxes for specific objectives, including deterring certain behavior.  Typically, products that are subject to excise taxes have negative societal connotations, allowing them to be more easily accepted by the public.  Alcohol and tobacco are the usual targets for excise taxes, but governments have more recently moved to tax “unhealthy” foods and drinks to raise revenue.

On January 1, 2022, New York Sen. Gustavo Rivera (D-33rd District), introduced S.B. 4602, to impose an excise tax on sugary drinks.  This bill would create a health equity fund to utilize revenues generated by the tax.  New York is already one of the highest tax states in the country, and the combined New York State and New York City maximum individual income tax rate is the highest in the country.  The idea that taxation can create prosperity or improve health is flawed.  The legislation will not only fail to improve public health, but it will also harm small businesses. 

History shows that sin taxes, including those on sugary drinks, are generally an ineffective, unfair, and unstable way to raise revenue. On January 1, 2017, Philadelphia, Pennsylvania, began enforcing a new 1.5 cent per ounce tax on soda, expecting to raise $46 million that year.  The city ended up raising $39.7 million, 14.6 percent less than initially projected.  A Drexel University study found Philadelphia’s 1.5 cent tax per ounce on soda had little to no impact on what Philadelphians were drinking.  It resulted in a de minimis decrease in three or fewer sugary drinks per month per consumer.  The introduction of the city-based tax increased soda consumption outside of the city, where untaxed sugary beverages were easily accessible.

Excise taxes disproportionally impact low-income earners.  If New York moves forward with the soda tax, a larger percentage of the cost will fall on low-income earners than higher-income earners, since sin taxes are always regressive.  Inflation is already creating an unnecessary burden on lower-income earners, as 45 percent of U.S. families face hardships to meet household needs due to the rising costs of food, gas, and other necessary goods.  This soda tax would be an extra, unnecessary, wasteful, and ineffective expense for Americans who are already scraping to get by.

Every excise tax eventually has a significant negative impact.  With so much pressure already being felt by taxpayers, the sugary beverage could break be the straw that breaks the camel’s back along with the consumers’ pocketbooks.