19 January 2009

Soda Taxes

This NYT column is about a month old, but the question is interesting, i.e., "should we levy an 18 percent tax on soda?"

Here are the claims:
  1. Americans drink 35 gallons/year of non-diet soda.
  2. America's obesity epidemic can be traced to soda.
  3. Obesity costs the public via higher health care spending.
  4. Soda is "too cheap" because corn subsidies make High Fructose Corn Syrup (HFCS) cheaper.
  5. New York's budget deficit makes it desirable to find new revenue sources.
Gee -- corn subsidies are stupid for another reason besides ethanol? Damn.

So the libertarian argument that people should be allowed to do what they want (1 and 2) is weakened by (3), and taxes (5) are better than a ban (marijuana anyone?) because they still allow people to consume at a higher cost. Is (4) a valid reason to raise taxes on soda? Not really -- it would be better to end subsidies and allow sugar into the US at world prices -- but, as Ben Ho would say, some people think that one stupid idea deserves another...

Bottom Line: If soda is bad for you like cigarettes are bad for you, then tax it.

hattip to DW

3 comments:

  1. Ennh. You can pig out on organic pineapple or peanuts and turn into a fatso too. And why is Snapple any different than soda? And if we have socialized the cost of being unhealthy, should we not find a way to un-socialize that cost, so that there is some incentive for people to stay healthy?
    No to the tax-nannies!

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  2. The externality argument, that soda causes obesity which imposes costs on all of us, is not a reason to tax. The link is not solid enough. I can drink a soda per week and probably see no difference in my health. What about 2? Or 6? Perhaps at some point, yes. But it is different for every person, and the effect is non-linear, unlike the tax. Furthermore, unless we are going to tax every sweet thing out there, there are ways around it. The key here is better science on the effect of sugar on the body - all types of sugar. And also, I do not want the government in charge of determining what is healthy because they have shown such a poor ability to do so in the past.

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  3. I haven't read the link, but in response to Damian's point, I'd like to add that it isn't the soda that is causing the externality, it is the subsidy on the sweetener.

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