Section 1 Short title
This Act may be cited as the “Sugary Drinks Tax Act of 2021” or as the “SWEET Act”.
Sugary Drinks Tax Act of 2021
A BILL
To amend the Internal Revenue Code of 1986 to impose an excise tax on sugary drinks, to dedicate the revenues from such tax to the prevention, treatment, and research of diet-related health conditions in disproportionately impacted populations, and for other purposes.
Sec. 2 Findings and purposes
Findings— The Congress finds that:
The prevalence of obesity in the United States has increased dramatically over the past 40 years. From the 1960s to the late 1970s, the prevalence was relatively constant, with about 15 percent of the population classified as obese. After the 1970s, these rates began to climb. According to the Centers for Disease Control and Prevention, well over one-third of adults—42.4 percent (2017–18)—and 18.5 percent (2015–2016) of youth in the United States were obese. Although no group has escaped the epidemic, low-income people and communities of color are disproportionately affected. Nearly half (49.6 percent) of African-American adults were obese and 44.8 percent of Hispanic adults were obese in 2017–2018.
The percentage of children who are overweight has also increased dramatically in recent decades. After being relatively constant from the 1960s to the 1970s, the prevalence of overweight children has more than tripled among children between 6 and 11 years of age and nearly quadrupled among those between 12 and 19 years of age. Despite significant public and private investment, childhood obesity rates among young people aged 2–19 remain high affecting about 13.7 million children.
There are significant racial and age disparities in obesity prevalence among children and adolescents. In 2015–2016, obesity prevalence was higher among Hispanics (25.8 percent) and non-Hispanic Black youth (22.0 percent) than non-Hispanic White youth (14.1 percent). The prevalence of obesity was lower in non-Hispanic Asian youth (11.0 percent) than in youth who were non-Hispanic White, non-Hispanic Black, or Hispanic.
Overweight and obesity are responsible for an estimated $190 billion in health care costs nationally, or approximately five to ten percent of all medical spending—with more than 20 percent of these costs paid publicly through the Medicare and Medicaid programs. The medical costs for people with obesity are dramatically higher than those without obesity.
The obesity epidemic is of particular concern because obesity increases the risk of diabetes, heart disease, certain types of cancer, arthritis, asthma, and breathing problems. Depending on their level of obesity, from 60 percent to more than 80 percent of obese adults have type 2 diabetes, high blood cholesterol, high blood pressure, or other related conditions. According to the CDC, nearly 60 percent of overweight children have at least one risk factor for heart disease.
Overweight and obesity increase the risk for several types of common cancers, including postmenopausal breast, colorectal, endometrial, kidney, pancreatic, esophageal, and gall bladder cancer. Up to one in four of all cancer cases and one in three cancer deaths are due to poor nutrition, physical inactivity, and overweight and obesity.
There is overwhelming evidence of the link between the consumption of sugary drinks, such as non-diet soft drinks, energy drinks, sweet teas, and sports drinks, and obesity and diabetes. Sugary drinks are the only food or beverage shown to increase the risk of overweight and obesity. Adults who drink one sugary drink or more per day are 27 percent more likely to be overweight or obese, regardless of income or ethnicity. After six months, daily consumption of one liter of sugary drinks increases fat deposits in the liver by 150 percent, which directly contributes to both diabetes and heart disease. Over 10 years, about two million type 2 diabetes cases in the United States are attributable to consumption of sugary drinks.
According to nutrition experts, sugary drinks, such as soft drinks, energy drinks, sweet teas, and sport drinks, offer little or no nutritional value, but massive quantities of added sugars. A 20-ounce bottle of soda contains about 16 teaspoons of sugars. Yet, the American Heart Association recommends that Americans consume no more than six to nine teaspoons of sugar per day from all food and beverage sources.
The 2020 Dietary Guidelines states that sugary drinks are the top source of added sugars in the American diet. For adults, sugary drinks (e.g., soda, sports drinks, energy drinks, fruit drinks) and sweetened coffees and teas (including ready-to-drink varieties) contribute over 40 percent of daily intake of added sugars. In childhood, sugary drinks make up about 15 to 25 percent of total added sugars intake. By adolescence, their contribution is 32 percent and even higher when considering coffee and tea beverages with added sugars (an additional 7 percent). The Dietary Guidelines Advisory Committee recommended that no more than 6 percent of daily calories come from added sugars.
Though sugary drink consumption is declining modestly as people learn about their harmful health effects, Americans are still consuming twice as much of these products as they did in the 1970s. Reports show that in recent years sugary drink purchasing has only gone down 6 calories per person per day since 2014. Five percent of Americans consume at least 567 kcal from sugar drinks on any given day—equal to more than four 12-ounce cans of soft drink. On average, children consume more than 30 gallons of sugary drinks every year. This is enough to fill a bathtub.
In a study of more than 50,000 female nurses, women who increased their sugary drink consumption from no more than one per week to at least one per day gained an average of 10 pounds over four years. Research also shows a significant link between sugary drink consumption and weight gain in children. In a randomized double-blind controlled trial of roughly 640 children, those who were given one 8-ounce serving of a sugary drink a day gained more weight and body fat over 11/2 years than those who got one 8-ounce serving of a sugar-free drink.
Sugary drinks are a unique contributor to excess caloric consumption. A large body of research shows that calories from sugary drinks do not satisfy hunger the way calories from solid food or fat or protein-containing beverages such as those containing milk and plant-based proteins. As a result, sugary drinks tend to add to the calories people consume rather than replace calories from other foods and beverages.
Overweight children have a much greater chance of being obese as adults, with all the health risks that entails.
Type 2 diabetes, previously only seen among adults, is now increasing among children. Data show that almost a quarter of teens now have either diabetes or prediabetes. If the current trends are not reversed, it is predicted that one in three children and nearly one-half of Latino and African-American children born in the year 2000 will develop type 2 diabetes in their lifetime.
A 2015 review found that increasing sugary drink consumption by one serving per day increased the risk of heart disease by 17 percent and hypertension by 8 percent. In 2012, 50,000 deaths were associated with drinking too many sugary drinks. Of that, 40,000 deaths in the U.S. were attributed to heart problems and 10,000 deaths were attributed to type 2 diabetes caused specifically by consuming too many sugary drinks.
Tooth decay (dental caries) is the single most common chronic childhood disease, experienced by more than one-fourth of United States children aged 2–5 years and half of those aged 12–15 years. About half of all children and two-thirds of adolescents aged 12–19 years from lower-income families have had decay. According to the American Academy of Pediatric Dentistry, children who frequently or excessively consume beverages high in sugar are at increased risk for dental caries. Untreated dental caries can lead to pain, infection, tooth loss, and in severe cases, even death. It can slow normal growth and development by restricting nutritional intake. Children who are missing teeth may have chewing problems that limit their food choices and result in nutritionally inadequate diets.
Local sugary drink taxes that have been implemented and evaluated in the United States have consistently decreased sales of taxed beverages by a range of 10 to 39 percent. They have also raised millions of dollars for community priorities.
Purposes— It is the intent of the Congress, by adopting the Sugary Drinks Tax Act (also known as the SWEET Act), to diminish the human and economic costs of diabetes, obesity, dental caries, and other diet-related health conditions. This Act is intended to discourage excessive consumption of sugary drinks by increasing the price of these products and by creating a dedicated revenue source for programs and research designed to reduce the human and economic costs of diabetes, obesity, dental caries, and other diet-related health conditions in disproportionately impacted populations.
Sec. 3 Excise tax on certain sugary drinks
In general— Subchapter D of chapter 32 of the Internal Revenue Code of 1986 is amended by inserting after part I the following new part:
“II Sugary Drinks
“4171. Imposition of tax
“(a) In general—There is hereby imposed a tax on the sale or transfer of any specified sugary drink product by the manufacturer, producer, or importer thereof.
“(b) Rate of tax—The rate of tax imposed under subsection (a) in such specified sugary drink products shall be calculated using the following tiered system:
“(1) For sugary drinks in cans, bottles, plastic or other containers:
“(A) Tier 1: Drinks with fewer than 7.5g of sugars per 12 fluid ounces will not be taxed.
“(B) Tier 2: Drinks with 7.5g to fewer than 30g of sugars per 12 fluid ounces will be taxed at a rate of $0.02 per ounce.
“(C) Tier 3: Drinks with more than 30g of sugars per 12 fluid ounces will be taxed at a rate of $0.03 per ounce.
“(2) For syrups and powders sold or offered for sale to a retailer for sale to a consumer, either as syrup or powder or as a sugary drink derived from that syrup or powder, are taxable:
“(A) Syrups and powders shall be taxed using the following tiered system:
“(i) Tier 1: If the drink made from the syrup or powder have fewer than 7.5g of sugars per 12 fluid ounces, the syrup or powder will not be taxed.
“(ii) Tier 2: If the drink made from the syrup or powder have 7.5g to fewer than 30g of sugars per 12 fluid ounces, the syrup or powder will be taxed at a rate equal to $0.02 per ounce of sugary beverage produced from that syrup or powder.
“(iii) Tier 3: If the drink made from the syrup or powder have more than 30g of sugars per 12 fluid ounces, the syrup or powder will be taxed at a rate equal to $0.03 per ounce of sugary drink produced from that syrup or powder.
“(B) For purposes of calculating the tax, the volume of sugary drink produced from syrups or powders shall be the larger of (1) the largest volume resulting from use of the syrups or powders according to any manufacturer’s instructions, or (2) the volume actually produced by the retailer, as reasonably determined by the Secretary.
“(3) The Nutrition Facts label, as required by the Food and Drug Administration, shall be used to determine the amount of sugars per 12 ounces of sugary drink by referencing the “Serving Size” and “Total Sugars” lines on the label.
“(c) Persons liable for tax—The manufacturer, producer, or importer referred to in subsection (a) shall be liable for the tax imposed by such subsection.
“(1) It is suggested that the amount of tax imposed by this section be passed along to consumers. Manufacturers, bottlers, wholesalers, or distributors should add the tax amount to the distribution price of sugary drinks, and retailers should add the tax amount to the retail price of sugary drinks.
“4172. Definitions
“(a) Specified sugary drink product—For purposes of this part—
“(1) In general—For purposes of this part, the term specified sugary drink product means—
“(A) any liquid intended for human consumption which contains a caloric sweetener, and
“(B) any liquid, or solid mixture of ingredients, which—
“(i) contains a caloric sweetener, and
“(ii) is intended for use as an ingredient in a liquid described in subparagraph (A).
“(2) Exceptions—The following shall not be treated as liquids described in paragraph (1)(A):
“(A) Any liquid the primary ingredients of which are milk or soy, rice, or similar plant-based milk substitute.
“(B) Any liquid composed entirely of one or more of the following:
“(i) The original liquid resulting from the pressing of fruit or vegetables.
“(ii) The liquid resulting from the reconstitution of fruit or vegetable juice concentrate.
“(iii) The liquid resulting from the restoration of water to dehydrated fruit or vegetable juice.
“(C) Infant formula.
“(D) Any liquid products manufactured for use as—
“(i) an oral nutritional therapy for persons who cannot absorb or metabolize dietary nutrients from food or beverages,
“(ii) a source of necessary nutrition used due to a medical condition, or
“(iii) an oral electrolyte solution for infants and children formulated to prevent dehydration due to illness.
“(E) Any liquid with respect to which tax is imposed under chapter 51 (relating to distilled spirits, wines, and beer) or under section 7652 by reason of the tax imposed under chapter 51 being imposed on like articles of domestic manufacture.
“(b) Caloric sweetener—For purposes of this part, the term caloric sweetener means monosaccharides, disaccharides, and high-fructose corn syrup.
“4173. Special rules
“(a) Sweetener taxed only once—In the case of any specified sugary drink product which is manufactured or produced by including one or more other specified sugary beverage products, no tax shall be imposed under this section on any caloric sweetener contained in the resulting specified sugary drink product if tax was previously imposed under this section on such caloric sweetener when contained in the specified sugary drink product so included.
“(b) Inflation adjustment—The tax amounts set forth in this section shall be adjusted annually by the Secretary in proportion with the Consumer Price Index: All Urban Consumers for All Items for the Statistical Area as reported by the United States Bureau of Labor Statistics or any successor to that index. Any increase determined under this subsection shall be rounded to the nearest multiple of one-tenth of a cent.”
Conforming amendments—
Section 4221(a) is amended by adding at the end the following: “Paragraphs (1), (4), (5), and (6) shall not apply to the tax imposed under section 4171.”.
The table of parts for subchapter D of chapter 32 of such Code is amended by inserting after the item relating to part I the following new item:
Revenues used To Improve nutrition quality of the School Breakfast Program—
Transfer to the School Breakfast Program— There are hereby appropriated to the School Breakfast Program created under section 4(b) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1753(b)) (in addition to any other amounts appropriated to such Program) amounts equivalent to the taxes received in the Treasury under part II of subchapter D of chapter 32. Rules similar to the rules of section 9601 of the Internal Revenue Code of 1986 shall apply with respect to the amounts appropriated under this paragraph.
Performance-based use of funds—
The U.S. Department of Agriculture will promulgate proposed regulations no later than six months upon enactment to update the meal patterns and nutrition standards for the School Breakfast Program established by section 4 of the Child Nutrition Act of 1966 (42 U.S.C. 1773) to be in compliance with the quantitative recommendations of the most recent Dietary Guidelines for Americans, including, but not exclusive of, a first ever standard for added sugars.
Beginning on the promulgation of the implementing regulations described in subsection (c)(2)(A), the Secretary shall provide an additional 10-cent reimbursement for each breakfast served by a school food authority certified by the State to be in compliance with the interim or final regulations described in subsection (c)(2)(A).
Failure to comply— Beginning on the date described in subsection (c)(2)(A), school food authorities found to be out of compliance with the meal patterns or nutrition standards established by the implementing regulations shall not receive the additional reimbursement for each breakfast served described in this paragraph.
Effective date—
In general— Except as provided in paragraph (2), the amendments made by this section shall take effect on the date of the enactment of this Act.
Excise tax— The amendments made by subsections (a) and (b) shall apply to sales after the date of the enactment of this Act.