Washington State’s Proposed Beverage Tax Will be Harmful to Consumers: Here is Why

In 2018, Seattle imposed a tax on soda and other sweetened beverages sold in the city to reduce the consumption of these drinks. Now, three years later, members of Washington’s legislature are looking to expand the tax across the state.

Senate Bill 5371, introduced in the Washington State Senate last week, will adopt the same tax rate as the city of Seattle ($0.0175 per fluid oz.) and apply it to all sugary drinks sold in the state. Other cities like Philadelphia and Chicago have implemented similar soda taxes, but this bill would make Washington State the first to implement a sugary beverage tax at the state level. If passed, the government plans to use the collected tax revenue from sales to fund public health services, as well as address the negative effects sweetened beverages have on disproportionately impacted communities, most of which are majority non-white.

Exporting the problems soda taxes create out of Seattle and imposing them on all Washington residents would have significant negative effects on those who consume these beverages, as well as  businesses who rely on the sale of these drinks.

Excise taxes on beverages have a huge design flaw, and Washington’s proposal is no different. These taxes combine the two goals of raising revenue from the purchase of sweetened drinks and disincentivizing consumers from purchasing these products. These goals are contradictory and cannot work simultaneously. Beyond that, the burden from an excise tax on soda falls primarily on consumers and businesses in poorer areas.

A sweetened beverage tax is meant to benefit the community by encouraging healthier choices and raising revenue to deal with the health consequences of consumption. While this may seem beneficial, these taxes are highly regressive.

The increase in price results in individuals who are rich enough picking more expensive substitutes like milkshakes, which are higher in calories. This leaves the poorest of residents in the position of paying for the tax. Research from the University of Washington found that consumers were paying for nearly 100% of the Seattle tax themselves in the form of higher prices. Instead of nudging these people to choose better options, these taxes will squeeze their already slim budgets.

Small businesses in Seattle have struggled under the weight of these taxes. Residents are choosing not just to buy their soda from other shops outside the city, but the rest of their grocery list as well, causing these shops to lose much more than just the sale of a sugary drink.

Restaurants, convenience stores, and gas stations have also felt the effects of these taxes. Many residents are choosing to shop and eat at the stores of larger companies who can afford to take a loss on soda profit to keep prices lower than smaller competitors, and store owners as a result have seen an immediate dramatic decrease in sales. To stay afloat, small business owners have had to reduce labor costs by cutting wages and hours for employees.

Consumers and businesses are struggling with these taxes, and there is no evidence showing they are working the way policymakers intended. Multiple studies on similar taxes, like in Seattle, have shown calorie intake to be nearly unchanged and thus having no impact on health outcomes for people. If scientific studies show soda taxes not to be effective in shaping consumer consumption, then the purpose of the tax is fundamentally flawed. It is truly a lose-lose proposition: consumers pay more, health outcomes are unchanged, and state tax revenues come up short.

Making Seattle’s beverage tax statewide would make the problems seen in the city felt to the rest of the state. While negatively impacting consumer pocketbooks, the empirical evidence shows that it would do little to improve the health of Washingtonians.

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