The DC Beverage Tax Will Harm Small Businesses and Consumers | Citizens Against Government Waste

The DC Beverage Tax Will Harm Small Businesses and Consumers

The WasteWatcher

The Council of the District of Columbia held its first hearing on May 19, 2021 for the Nutrition Equity Amendment Act of 2021, which would impose a 1.5 cents-per-ounce tax on sugary drinks in the District of Columbia.  This bill would also create a Nutrition Equity Catalyst Fund with the goal of teaching elementary students how to eat healthier. 

During the hearing, several small businesses spoke in opposition to the increase as they are already struggling to survive.  Some of the witnesses also noted the proximity of D.C. to Maryland and Virginia.  Since neither state has a similar beverage tax, everyone in D.C. can easily purchase sugary drinks by traveling to one of those jurisdictions.  Other options include online purchases, which is more prevalent than ever after the last year of the pandemic.

District of Columbia pediatrician Dr. Yolanda Hancock has argued that the beverage tax is needed in order to combat obesity in adults and children, especially since around 80 percent of people that died from COVID-19 were overweight or obese. 

However, a February 2020 study from Drexel University found that one year after Philadelphia raised its tax by 1.5 cents-per-ounce on sweetened beverages back in January 2017, it had no impact on what Philadelphians were drinking.  According to a study by the Stanford Business School, the demand for the taxed sweetened beverages fell by 46 percent in Philadelphia, and nearly half of the that drop in demand came from shopping in nearby jurisdictions without the sweetened beverage tax. 

It is also doubtful that the sweetened beverage tax will deliver expected fiscal windfall that proponents anticipate, meaning there would be a shortfall in the estimated finances for the nutrition fund, which in turn would have to be made up with other taxes.  Philadelphia originally projected that six months into the beverage tax, $46 million would be raised in fiscal year 2017, then lowered expected revenues to $39.7 million.  The final revenue amount was $39.3 million, 14.6 percent less than the original projection.  

Beverage taxes have proven to be harmful to small restaurant owners and their families, and the impact will be even more pronounced on those who have struggled to make ends meet during the coronavirus pandemic.  Even before the pandemic, restaurants operated at extremely thin margins.  Unnecessary and ineffective taxes like the sugary drinks tax could push a substantial number of them out of business. 

Taxes should be flat, low, and broad-based, instead of targeting specific products and industries.  The District of Columbia should not enact extra discriminatory and regressive taxes on items that will place a heavier burden on those who can least afford them.

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