Excise Tax on Sugared Beverages Provides Major Tool in Attack on Obesity Epidemic, Daines Testifies

Tax Will Improve Health, Reduce Health Care Costs, and Direct Needed Revenues to Health Care, Daines tells Senate Health Committee

NEW YORK, N.Y. (Jan. 22, 2010) – Testifying today before a State Senate hearing here, State Health Commissioner Richard F. Daines, M.D., said an excise tax on sugared beverages included in Governor Paterson's proposed Executive Budget is expected to reduce New Yorkers' consumption of unhealthy sugar-sweetened beverages by a projected 15 percent, improving their health and reducing health care costs associated with obesity.

"The obesity crisis in New York State is one of our greatest public health challenges, resulting in extensive ill health and high health care costs," said Commissioner Daines. "Governor Paterson is advancing a strong Obesity Prevention Agenda based on a combination of education, price incentives, and health policy to help stop and reverse the obesity epidemic."

Dr. Daines said that currently approximately 60 percent of adults and 35 percent of children and adolescents in New York are obese or overweight, which are major causes of heart disease, diabetes, hypertension, some cancers, and many other chronic and debilitating conditions. Moderately obese individuals have an average life expectancy 2 to 5 years shorter than those who are not overweight or obese, while severely obese individuals have a life expectancy of up to 20 years shorter.

Health care costs for treating conditions related to obesity in New York State are an estimated $7.6 billion a year, with much of that cost paid by taxpayers through Medicare and Medicaid. If the crisis is not halted and reversed, the cost of obesity is projected to quadruple by 2018.

"There are many contributing factors to the obesity epidemic," said Dr. Daines. "But numerous studies have identified sugar-sweetened beverages as the food group most strongly linked with increased rates of obesity and risk for diabetes." Current per capita consumption of sugar-sweetened beverages for American adults is an average of 46 gallons a year – the equivalent of 40 pounds of sugar. Since 1970, sugar intake has increased about 16 pounds per person annually from additional sugary beverages in the diet.

Of special concern is the increased consumption of sugar-sweetened beverages by children and adolescents. Research in the journal Physiology and Behavior (2010) finds that the consumption of these beverages by children aged 2-18 years increased 75 percent between 1977-78 and 2005-06.

Rather than a sales tax applied at the retail level, the proposed excise tax would be levied on beverage syrups and soft drinks when they are first imported into the State, or when they are produced, refined, bottled or manufactured. The tax would amount to approximately one cent per ounce on soft drinks that contain more than 10 calories per 8 ounces. The affected beverages would include sweetened (non-diet) soda, sweetened water, sports drinks, "energy" drinks, colas, sweetened bottled coffee or tea, and fruit or vegetable drinks containing less than 70 percent natural fruit or vegetable juice. Milk, milk products, milk substitutes, and infant formula would be exempt.

The tax would increase the price of sugar-sweetened beverages by an estimated 17 percent, leading to a projected 15 percent reduction in consumption of these beverages. Based on an implementation date of September 1, 2010, the tax is expected to raise $465 million during the first fiscal year, and an estimated $1 billion over a full fiscal year. The revenue produced by the tax will be directed to health and health care related programs that otherwise would have to be cut.

"While there are necessary reductions in health care spending in the proposed Executive Budget, without the additional revenue produced by this excise tax, the Governor would have been forced to recommend much greater reductions in health care spending," Dr. Daines said. "The tax will have a three-fold benefit: improved health, lower health care costs, and much needed revenues for health care."

Additional initiatives in Governor Paterson's Obesity Prevention Agenda include:

  • A program allowing participants in the Women, Infants and Children (WIC) program to use their monthly food checks at farmers markets to purchase fresh produce.
  • A revolving loan fund to increase access to healthy foods through the creation of food markets in underserved communities.
  • Support for the development of the Community Coalitions for Obesity Prevention Program.
  • The "Healthy Steps to Albany: First Lady's Challenge" that encourages school children to engage in daily fitness activities.
  • Proposed legislation that would require calorie posting on menus and menu boards of chain retail food establishments.
  • Proposed legislation that would ban the use of trans fats in ready-to-eat foods sold or served in chain restaurants and retail food service stores.
  • Proposed Healthy Schools Act that would ban the sale of high-fat, high-sugar junk foods in schools and improve nutritional intake at schools in other ways.

The text of Dr. Daines' testimony can be viewed or downloaded at: http://www.nyhealth.gov/commissioner/testimony/2010_01_22_public_hearing_food_policy.htm