About a decade ago, public health researchers started advocating for implementation of a soda tax to combat consumption of sugary drinks. Soda intake has long been linked to the exacerbation of a series of potentially avoidable health problems including: obesity, diabetes, and tooth decay. After the recent election, four more U.S. cities voted to adopt a soda tax, spreading this new “sin tax” to more areas across the country. With more than one-third of American adults currently classified as obese, soda taxes could become a go-to method for combatting obesity, while simultaneously generating revenue for state budgets to fund local programs.

What are Sin Taxes?

Sin taxes are state-sponsored taxes that are added to specific products that are generally seen as vices, such as gambling, alcohol, and tobacco. In essence, by utilizing financial means, the government attempts to discourage individuals from engaging in a specific activity or using specific products without actually making those products or services illegal. Sin taxes are often compared to Pigovian taxes, which are taxes that generate negative externalities. In tax policy, a Pigovian tax is a fee assessed against private individuals or businesses for engaging in a specific activity; a negative externality occurs when an economic actor does not fully internalize the cost of activity. A simple example of a Pigovian tax is a pollution-related tax.

Currently, sin taxes are employed in a variety of sectors. Typically, they are added to liquor, tobacco, gambling, and other non-luxury items. There tends to be a decent amount of public support for sin taxes, as they are indirect and only affect those who use the specific products. Sin taxes are also extremely popular when trying to close large state budget gaps. Employing sin taxes for soda and sugar-sweetened beverages can help generate revenue and encourage public health initiatives. One research economist from the Research Triangle Institute has modeling data that suggests a six-cent tax on a twelve-ounce bottle of soda would lead consumers to drink 5,800 fewer calories from sugary drinks per year.

Using Soda Taxes to Combat Obesity

In 2014, voters in Berkeley, California passed the nation’s first soda tax, which went into effect in 2015. Additionally, in 2014, Mexico passed its own soda tax. After one year, sales of soda in Mexico fell as much as 12 percent, while bottled water purchases rose four percent. The researchers also found that while decline was seen across all socioeconomic groups, it was greatest among those who were low-income, with consumption falling 17 percent.

In the U.S., Berkeley’s tax was largely successful; research showed that soda consumption dropped in the city a staggering 20 percent. Philadelphia was the next city to follow suit, passing a soda tax earlier this year–thus becoming the first major city in the U.S. to do so. The tax, which is expected to generate $91 million annually, will be spent on pre-kindergarten programs in the city, creating community schools, improving parks and recreation centers, and libraries.

The beverage industry has fought extensively to keep soda taxes from passing elsewhere in the country. Advocates from the American Beverage Association, which represents all major soda brands, responded to the Philadelphia policy by arguing that the tax was regressive and unfairly singled out “low” and “no-calorie” beverages. In an effort to combat the tax, companies in the roughly $100 billion industry have focused their efforts on reformulating existing drinks to make them more healthy for consumers. However, even “diet” sodas are experiencing a sharp decline in sales, particularly because of increased suspicion regarding artificial sweeteners.

Soda Taxes Passed in November 2016

The World Health Organization recently recommended that governments impose soda taxes in order to combat a variety of diet-related diseases exacerbated by high soda consumption. Soda taxes were on the ballot in early November of this year in  three California cities–San Francisco, Albany, and Oakland–as well as Boulder, Colorado. The soda taxes passed in all four cities with fairly large margins of support, much to the dismay of the beverage industry. The American Beverage Association spent upwards of $9.5 million on an ad campaign opposing the measures entitled “Don’t Tax Our Groceries.”

The amount of tax in each city, however, varies. In San Francisco, Albany, and Oakland, the tax is one penny per ounce of soda. In Boulder, the tax is two pennies per ounce of soda, and the soda tax that passed earlier this year in Philadelphia was set at 1.5 cents an ounce. The disparities in the amount of tax per ounce are likely to continue as more jurisdictions follow suit.

These laws are also coming into effect at a time when soda consumption is down among Americans. In a 2014 Gallup poll, nearly two-thirds (63 percent) of Americans reported avoiding soda in their diet; in 2002 that number was only 41 percent. Moreover, over the last 20 years, sales of full-calorie soda have dropped by more than 25 percent. “Big Soda” is experiencing a substantial and sustained decline, while bottled water remains on track to overtake soda as the largest beverage category. The changing soda consumption patterns are noticeable in schools, where cafeterias and vending machines have stopped carrying regular sodas, and in many workplaces and government offices that have similarly limited sales. Soda, it seems, has now become the new tobacco: an unhealthy product that should be limited, if not outright banned, and taxed significantly.

“Soda” Image Courtesy of Rex Sorgatz : License (CC BY 2.0)

Issues with Soda Taxes

Not everyone is a fan of soda taxes. While the American Health Association has touted the win as a huge victory, many argue that the taxes affect low-income populations the most. Sin taxes arguably have a disproportionate effect on poor and less educated communities. Since sin taxes are typically regressive in nature, the less money a person makes, the larger percentage of his or her income the taxes take. Essentially, if comparing two “pack-a-day” smokers–one lower-income citizen and one high-income citizen–one can see that the two are spending the same amount of money on cigarettes and taxes each year. The taxes on those same cigarettes, however, are taking up much more of the lower-income citizen’s paycheck.

Additionally, the beverage industry contends that more taxes are not ideal when pursuing public health initiatives. Susan Neely, CEO of the American Beverage Association, stated that consumers don’t want these taxes. She also added that the industry is committed to reducing the amount of calories and sugar in these beverages and combating diet-related issues in a variety of manners. This includes partnering with Alliance for a Healthier Generation in order to try to change behaviors of people who may be receiving far too many calories from beverages. Other strategies include an ad campaign called “Balance What You Eat, Drink & Do” that encourages people to think more readily about the calories they are consuming. The beverage industry is also working with retailers to put more low-calorie choices at eye-level, so consumers will be more likely to pick those choices.

Conclusion

Whether you see soda taxes as a necessary movement or not, the U.S. is certainly grappling with an obesity epidemic. Educating the public about calorie and sugar consumption is critical to combating this public health crisis, in addition to making a myriad of low-calorie, no-calorie, and low-sugar choices more readily available in a variety of communities across the country. Sometimes, the easiest way to help people make changes is by utilizing financial means, and soda taxes may be an effective way to incentivize healthier behaviors. The law of demand works in practice, not just theory: when prices go up, people buy less.

For now, soda taxes seem to be here to stay, as they find their way into more cities across the country. “Big Soda” does appear to be in serious decline, and unless the industry can find a way to keep up with the public’s changing preferences, the downward trend may continue into the future. While the amount of a given tax will continue to vary depending on the jurisdiction, the long-term effects of taxes may be even more effective if taxes are increased and become more widespread. The amount of money generated from soda taxes has the potential to be large, and using the revenue to fund desperately-needed or underfunded programs, like Philadelphia intends to do, may be an ideal solution.

Nicole Zub

Nicole is a third-year law student at the University of Kentucky College of Law. She graduated in 2011 from Northeastern University with Bachelor’s in Environmental Science. When she isn’t imbibing copious amounts of caffeine, you can find her with her nose in a book or experimenting in the kitchen. Contact Nicole at Staff@LawStreetMedia.com.

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California is in the midst of one of the worst droughts we’ve ever seen. The demand for water is exceeding the actual supply of water in the region, leading to big problems. The Southwest region of the United States has always been a dry area, and previously most Southwestern states nursed from the same water supply. Due to a decline in the water supply, those same procedures will not work in 2015 and beyond. Read on to learn about the changing policies for California relating to its water supply, and the potential effects of California’s drought.

Colorado River Sources

In order to understand the water problems occurring in California and the American Southwest as a whole, it’s important to understand the overall state of water in the region. The Colorado River and other water sources in the area play an important role, both historically and today.

According to the Glen Canyon Institute, here’s the background of the area: Seven states in the Colorado Basin signed the Colorado River Compact in 1922. The agreement allocated water rights between New Mexico, Nevada, Utah, Wyoming, Colorado, Arizona, and California.

But now the Colorado River Basin is experiencing a natural disaster and water supply tragedy. That agreement almost 100 years ago was reached based on an overestimation of river flow, and an underestimation of water demand. As a result of the growing demand and unyielding drought, there is a water deficit of almost 1 million acre-feet a year in the Colorado River system.

To provide water for over 40 million people, the Hoover and Glen Canyon dams were built as a part of the Colorado River water management system under the 1922 agreement. This created the Lake Mead and Lake Powell reservoirs. But now, both the Lake Powell and Lake Mead reservoirs are half empty. Environmentalists doubt the reservoirs will ever naturally fill again.

As a result, the conservation and fate of the Colorado River system is directly linked to the environmental health of the Southwest.

How did this problem begin?

During the last century, more than a dozen dams were built which negatively affected the flow of the Colorado River, as a result, “hundreds of miles of canyon and countless archaeological sites have been flooded, and dozens of wildlife species have been endangered.” Glen Canyon Dam is one of the largest contributors to these issues.

The Grand Canyon Protection Act of 1992 was meant to alleviate the negative effects the Glen Canyon Dam had caused; specifically to, “protect, mitigate adverse impacts to, and improve the values for which Grand Canyon National Park and Glen Canyon National Recreation Area were established.” Despite the fact that this act was passed 23 years ago, little implementation or success has been seen.

Lake Mead & Lake Powell

In Lake Mead, water levels have dropped to 1,085 feet above sea level, the lowest in 75 years, and only 10 feet above the level that would trigger cuts in water deliveries by the federal government to Arizona and Nevada.

The purpose of building the dams was to keep the lake reservoirs full. Some strategize to “Fill Lake Mead First” arguing it would benefit the people who depend on Lake Mead in major cities like Los Angeles and Las Vegas. However, this strategy appears to be largely going unnoticed by policymakers.

 California Water Policies

It was only in 2014 that the California government began to recognize the severity of the drought and began to enact serious policy changes. Governor Jerry Brown and California Democratic lawmakers “enlisted business support of a $7.2 billion plan composed mostly of new bonds for water storage and delivery to drought-stricken cities and farms.”

California Governor Jerry Brown signed three bills designed to regulate the pumping of water from underground aquifers. An aquifer is an underground layer of materials such as sand, silt or gravel from which groundwater can pumped up. Habitual digging for water has led to sinking–nearly 30 feet in some areas. Previously, aquifers provided 30-40 percent of California’s water supply. Since the drought, nearly 60 percent of the state’s water comes from underground. Scientists worry that it is possible to completely deplete the underground supply. Currently, there is no method to replace the underground water. In addition, a lack of underground water affects the species of animals who depend upon it. Without a diverse ecosystem underground, the quality of the dirt is also weakened over time.

Governor Brown first politely asked Californians to reduce their water consumption by 20 percent, but instead consumption rose. A water board survey of 267 water providers found consumption in the Bay Area dropped five percent. But in coastal California, consumption rose eight percent, leading to an overall one percent increase of water usage statewide.

As a result, Governor Brown ordered mandatory water use reductions –the first time such an action has been taken in California’s history. An executive order directed the State Water Resources Control Board to enforce a “25 percent reduction on the state’s 400 local water supply agencies, which serve 90 percent of California residents.” However, owners of large farms, who obtain their water from sources outside the local water agencies, will not be subject to the 25 percent mandate.

The agencies are responsible for creating ways to monitor compliance and enforce restrictions to cut back on water use; some hypothesize there should be fines from $500-$1000 per violation. 

The federal government has made a contingency plan as well. According to Nova Publishers, the U.S. Department of Agriculture offers programs to help farmers nationwide “recover financially from a natural disaster, including federal crop insurance, the Noninsured Crop Disaster Assistance Program (NAP), and emergency disaster loans.” These loans are typically less than $100 million per year.

Although state officials do not expect the executive order to result in an increase in farm or food prices; these assumptions can only apply to the immediate future. Long-term effects are still unforeseen.

What are the consequences of California’s water shortage?

Environment

While the entire Southwest region of the United States is facing challenges, California is seeing the most the extreme. Combined with extreme heat, and less circulation, the lack of rainfall has triggered a dangerous increase in wildfires and air pollution across the state. The smog is sticking around due to high-pressure systems, setting California back decades in terms of clean air and creating new health risks.

Jobs

A University of California-Davis research report estimated there would a direct cost to agricultural industry totaling $1.5 billion, a statewide economic cost of $2.2 billion and the loss of 17,100 jobs related to agriculture–rendering a 3.8 percent farm unemployment rate.

Prices

Observers are divided on whether California’s drought will make food prices rice. It seems logical that as farm acres become less useful, food would be more difficult to produce, thus making popular crops like tomatoes, artichokes, and broccoli more expensive.

The most affected crops will most likely be be rice, cotton, hay and corn silage. But crops like avocado, and mangoes which are mostly imported shouldn’t be affected.

Some retailers believe one of California’s signature products, wine, will see price increases in the coming months. The scarcity of water will likely increase prices for wines, especially some of the cheaper ones.

The U.S. is a geographically diverse nation, and does not solely depend on the Southwest for food production. For now, the globalization of food along with the nation’s agriculture industry has helped American consumers mostly escape higher food prices. These two factors continue to work to limit impacts on total food production and costs.

Why doesn’t Silicon Valley help?

What about reverse osmosis? Recycling water? All of those other terms we learned in biology? Technology should be able to solve this problem right? Well some efforts have begun.

California has started the Water Recycling Funding Program (WRFP) to promote the beneficial use of water recycling in order to add to fresh water supplies in California. State funding is going towards water treatment facilities, while most of private and outside funding is going towards the tech community innovations.

Or take Tech startup TerrAvion. According to CNBC it “flies manned aircraft over farmland and gives growers thermal images that can show farmers potential trouble spots when it comes to irrigation” and give tips on how to manage water more effectively.

WaterSmart Software works with water utilities to supply easy-to-understand information to customers on their water use–for example, showing how much water their home may be using compared to another home of the same size.

Conclusion

According to National Geographic, “for many years, California’s powerful agricultural lobby resisted any and all legislative attempts to regulate water restrictions, or groundwater withdrawals.” But, the extent of the current drought, combined with the state’s increasing demand for water has led to new support for change. We are in a new era and California may actually start to look like a desert. Even with the 25 percent reduction push, and the possibility of tech companies saving the day, Californians still must make behavioral changes to reduce water consumption. Even if Californians do make these changes, saving 25 percent of the water supply is not a long-term solution. It’s time for real change in California.

Resources

Popular Mechanics: 6 Radical Solutions for U.S. Southwest Peak Water Problem

National Geographic: Record Drought Reveals Stunning Changes Along Colorado River

Stanford: Causes of California Drought Linked to Climate Change, Stanford scientists Say

National Geographic: Amid Drought, New California Law Will Limit Groundwater Pumping

New York Times: California Imposes First Mandatory Water Restrictions to Deal With Drought

Glen Canyon: Fill Mead First

Arizona Central: States Expected to Reduce Water Taken from Lake Mead

CNBC: Silicon Valley Seeks to Help California

Fortune: The Consequences of California’s Severe Drought

Mercury News: California Drought Conservation Efforts Failing

KTLA: Heat, Drought Causes Significant Increase of Wildfires

LA Times: Heat, Drought Worsen Smog in California, Stalling Decades of Progress

Editor’s Note: This post has been updated to credit select information to The Glen Canyon Institute and National Geographic. 

Jasmine Shelton

Jasmine Shelton is an American University Alumna, Alabamian at heart, and Washington D.C. city girl for now. She loves hiking, second-hand clothes, and flying far away. Contact Jasmine at staff@LawStreetMedia.com.

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