A Few Thoughts on the New Seattle Soda Tax

Soda Tax Seattle Drink Council City

Seattle Soda Tax

On Monday, June 5, 2017, the Seattle City Council passed a motion which will implement a tax on sugary soft drinks (soda). This new “soda tax” is designed to reduce statewide obesity rates, particularly among children, and to raise additional funds for public projects. Expectedly, the passage of the soda tax has been met with both surprise and opposition as it raises issues regarding personal freedom and the role of government in the marketplace. Let’s look at the basic provisions and purposes of the tax and then discuss some of the arguments both in favor and against it.

Basic Facts

The soda tax was passed by a margin of 7-1; Lisa Herbold was the sole councilmember to vote against the tax. The city will collect 1.75 cents for every ounce of “sugary” soda, such as regular Coca-Cola, Pepsi and so forth. The tax will not be collected on diet sodas and sodas made by smaller distributors.

The tax is set to take effect on January 1, 2018. This date could be pushed forward, however, in the event that a legal challenge or other type of motion takes place in the interim. Prior to the vote on the tax, councilmember Herbold proposed several amendments which she claimed would mitigate some of the potential negative consequences of the tax. All of Herbold’s amendments failed except for her proposal that some of the tax proceeds be used to fund local food banks.

Pros and Cons

The chief architect of the tax, councilmember Tim Burgess, argued that the tax will make a positive impact on state obesity levels. Though the tax may (indirectly) encourage healthier eating habits, many opponents could argue that this tax represents an undesirable incursion by the state on the free market. Regardless of the price, people have a choice to purchase sugary soft drinks, and the tax on soda could easily be interpreted as a financial penalty on personal freedom. The soda tax, therefore, brings up the recurring issue of what role the government should play in preventing certain behaviors in the interest of the wider public good.

When viewed in this fashion, the soda tax acquires a rather lengthy pedigree. Sin taxes, such as those imposed on tobacco and liquor, have been relatively common throughout American history. In the 1920s (and early 1930s), we used Prohibition to guard against the supposedly toxic influence of alcoholic beverages; today, historians almost all concur that Prohibition was a failed experiment, but the issue of what level of responsibility the state has for promoting public health remains hotly contested. Here at HTC, we think it prudent to avoid a definitive stance on the issue; after all, we are not dealing with a ban or severe financial burden, only a small incentive to avoid sugary drinks. HTC is certainly very curious about the impact of the tax and we look forward to seeing hard numbers on whether the tax lives up to its expectations.

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Image credit: CapCase

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johnAbout john
Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

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