Earlier in January, New York governor David Paterson proposed to kill two birds with one stone by addressing obesity problems while sorting out his budget mess. How? By introducing a new excise tax of about one penny per ounce on sugared beverages, which he thinks should raise $465 million.
He isn’t the first one. Thirty-three states tax the sale of soft drinks, at an average rate of 5.2 percent already.
The rationale behind a tax on soft drinks, or any sin tax, is that when the government raises prices on a certain good, it will become so expensive that consumers will give it up. The story sounds plausible. The trouble is that sin taxers don’t appreciate human creativity: Consumers have a knack for replacing one sin with another. When the price of a “sinful” good increases, people often substitute an equally “bad” good in its place.
“Nonsense,” said a Health Policy Report published in the New England Journal of Medicine. The authors, then, insisted that raising the price of sugary drinks by means of a tariff will prompt people to buy less, consume less, and consequently gain less.
Well, today, Karen Kaplan writes at the LA Times’s Booster Shot blog that doctors are being very critical of the tax and of the New England Journal of Medicine article. It seems that after the publication of their pro-soda tax article, the Journal was flowed with letters from doctors all pointing out the holes in the article’s science, and saying that these taxes would not do anything to curb obesity.
That’s my take on the soda tax for Reason.
Thanks to Jim Morrell for the tip.