PI Original Adam Doster Tuesday February 16th, 2010, 3:36pm

A Sweet Source Of State Revenue?

Plenty of creative solutions will be needed to fill Illinois' $13 billion gap. Applying an excise tax on soda and other sugary drinks might be worth considering.

Plenty of creative solutions will be needed to fill Illinois' $13 billion gap. If lawmakers are serious about fixing the state's structural deficit, they will need to modernize the tax code by increasing the state's low income tax rate and applying the sales tax to services. But if House Speaker Michael Madigan continues to insist that he will only move forward with Republican support, there are some other reasonable options on the table for trimming costs and raising new revenue to pay off a portion of the state's existing debts. We've already urged the General Assembly to pass a new estate tax, block the federal "domestic production deduction," and investigate how the wealthiest Illinoisans are managing to shield so much of their taxable income from the state collectors. Applying an excise tax on soda and other sugary drinks might be worth considering, as well.

It's universally accepted that Americans drink too much pop. The typical person drinks about one gallon per week, or 190 empty calories in sugary drinks daily. That's up from 70 a day in the late 1970s, when serving sizes were much smaller. The Center for Disease Control reports that increase accounts for half of the daily caloric increase during that span. While causation is hard to prove, it's probably not a coincidence that obesity (particularly among children) has grown at similar rates during that span. Like cigarettes decades ago, beverage companies market their products with kids in mind.

Despite a 2009 poll that found broad support for such taxes, the national government and most states and municipalities have not tried to penalize soda-drinkers like they do consumers of tobacco and other "unhealthy" products. Only five states and the City of Chicago impose taxes on soft drinks, defined by Illinois state law as either "non-alcoholic beverages that contain natural or artificial sweeteners" or drinks with less than 50 percent of vegetable or fruit juice by volume. (In Chicago, the surtax is 3 percent.) But more and more legislators are considering it. New York Times food critic Mark Bittman pointed out this past weekend that 12 new states proposed excise taxes in 2009, although none ultimately approved the bills. Here in Illinois, the Illinois State Dental Society and a joint group of Illinois medical school pediatric departments chairmen have endorsed some form of fee in the past year.

The rationale is straightforward. Making it more expensive to drink pop, in theory, discourages soda consumption while providing revenue to cover the extra costs to government the unhealthy activity produces. Yale's Rudd Center for Food Policy and Obesity, in collaboration with the University of Illinois-Chicago, estimates that a one-cent-per-ounce tax on sugary drinks would raise $629 million in Illinois in 2011. Double the tax and the state would collect $900 million. That money could be immediately plowed back into the budget to improve dental care for the poor, reimburse public health care providers, or limit cuts to the state's education system.

Again, a soda tax should not be the state's first option, mostly because the jury is still out on how changes in soda price effects consumer demand and subsequently, public health. A New England Journal of Medicine study found that when the price of soda increased by 10 percent, consumption dropped by almost 8 percent on average. But the results are hardly definitive. Another point to consider: Any broad sales tax takes a larger chunk of income from working and middle-class consumers than the wealthy.

Even so, the state is in crisis and we need to consider as many sources of new revenue as possible.


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