Pity the Soda Tax

Amid the general wrack and roil of the debate over healthcare, a dozen smaller dramas have played out.  The one I’ll be writing about today seems all but finished, and it proceeded along the rote lines of a typical legislative tragedy.  To wit; a good idea is put forward, high-minded politicians dutifully offer it guarded praise, and then a wealthy interest lobby smothers the proposed measure in its crib and everyone goes on like nothing happened.

This time our protagonist was a federal excise tax on soft drinks.  That was one of several revenue generators proposed last spring in the early stages of the health-care reform fight.  At the time President Obama and several other legislators called it an idea “worth considering,” which is about like describing a potential date as “a really nice person.”  We can assume that such tepid praise anticipated the vociferous opposition of the well-heeled beverage lobby, in the face of whose frothy, hammering assault the measure went down like a clubbed seal.  It does not appear on the current Senate version of the proposed bill.

Which is a shame, because there are a number of good arguments for it.  Many of them were laid out in a short article that two doctors, Kelly Brown and Tom Friedan, published in the New England Journal of Medicine on April 30.  The gist of the doctors’ case was this: First, the evidence linking soft drink consumption to obesity and diabetes is conclusive.  Especially telling is the significant increase in consumption of soft drinks by children over the course of the last few decades, and the very strong link between daily consumption of those drinks by children and their risk of obesity.  Second, there is good economic evidence that the demand for soda is strongly influenced by price signals.  An analysis by the soft drink industry found that increasing the price of soda by 6.8% caused sales to fall by 7.8%.  Kelly and Friedan concluded that a penny an ounce excise tax on drinks sweetened with sugar or corn sweeteners, which would reduce consumption by an estimated 13%, would have a positive effect on public health, not to mention raising billions of dollars.

They also pointed out that the relative costs of sweet drinks and fruits and vegetables have changed dramatically in the last 30 years (sodas have gotten cheaper while produce has gotten more expensive), and that beverage companies take advantage of massive advertising budgets and the information asymmetries created by dubious health claims (Vault gives you energy!  Sunny D contains vitamin C!) to sell their products to children.  Given all that, it seems that a soda tax is a reasonable, even desirable method for both improving health and funding health-care.

Not so! says the beverage industry, along with its hastily astro-turfed “citizens group,” Americans Against Food Taxes.  (more…)

Published in: on October 15, 2009 at 3:11 pm Comments Off on Pity the Soda Tax
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