States come calling for higher taxes on sweets

Oct. 31, 2011 at 12:59 PM ET

Joshua Lott / Reuters /
Candy bars are often subject to sales tax, although the cookielike nature of some bars can pose problems.

On this Halloween, as you prepare to satisfy your sweet tooth, get ready to shell out a few extra pennies for the tax man, at least in the 17 states that have special taxes on candy.

The Tax Foundation, a Washington-based think tank that supports "sound" tax policy, has chosen today to release a new report on the growing trend among states to raise taxes on candy and soda, at least partly in an effort to combat the nation’s rising obesity rate.

The foundation says 17 states that exempt groceries from sales taxes make an exception for candy, while 22 states plus the District of Columbia exempt soda. That means candy and soda are subject to taxes of 2.9 to 7.25 percent that are not levied on other foods and beverages.

Another four states have special excise taxes on soda and an additional 14 have been considering them in the legislature. Tax rates vary from 21 cents per gallon in Arkansas to 1.9 percent in Tennessee.

The Tax Foundation notes that singling out candy and soda for special treatment in the tax code can be complicated. Many states struggle to define candy, exempting cookie-like bars such as Kit-Kat and Twix, for example. Sports drinks and diet sodas are generally but not always treated as soda. Starbucks’ bottled Frappucino beverage is subject to soda excise taxes in two states and exempt in two others, the report says.

Some see these taxes as an easy source of new revenue and a way to modify behavior, but the Tax Foundation report concludes that “singling out soda and candy for taxation is a poor method of combating obesity.”

Such taxes unfairly burden those who enjoy soda and candy responsible and have “unin­tended consequences,” such as encouraging the overconsumption of food and beverages that are taxed at a lower rate, the foundation says.

What do you think?