Pros and Cons of Soda Taxes

Why a Few Cents Makes Sense

Young woman reaching for colorful bottles of soda
Jamie Grill/Getty Images

Benjamin Franklin famously said something about our new Constitution, taxes, and death in 1789 that, over the years, has been transmogrified into: “Nothing’s sure but death and taxes; it’s a pity they don’t come in that order.” Whoever is responsible for that popular reimagining of the original insight captured something quite fundamental about taxes: None of us likes them.  None of us likes to surrender control over some of the money we work to earn.

But, of course, the matter is not so simple. We do like to know the police, firefighters, or paramedics will turn up when we call 911. We do like to know that a primary and secondary education is not doled out to our children based on a parent’s ability to pay. When we’ve got places to go, it’s good to know there are roads and rails, and that those roads are plowed in the winter. We like to know our military stands between us and threats to the security of our homeland.

Since soldiers and plow drivers, paramedics and public school teachers need to earn a living, too, the argument for taxes is clear enough. There are public goods we benefit from (and must pay for) collectively. But still, taxes are hard to love.

The Great Debate

That native sentiment has been translated into a policy platform by one of our major political parties, and that has important implications for public health. There is opposition to taxes on principle, and when taxes are proposed in the service of public health, it is generally referred to as a "nanny state" intrusion.

The idea is that we, the People, are being forced to do something that should be left to choice and personal responsibility.

This, then, is the context for debate about soda taxes. Left-leaning public health proponents generally favor them as a way to curtail the intake of the single most concentrated source of added sugars and superfluous calories in the typical American diet.

Right-leaning counterparts oppose them as nannyism.

I have expressed my own views on the topic publicly before now, both in print and videotaped testimony before the Finance Committee of the Connecticut General Assembly. I see both pros and cons in taxing soda, but there is a clear winner.

The first con is simply that none of us likes the idea of paying new taxes. The second is that, as a way of changing behavior, a tax is a stick—and most of us tend to prefer the proverbial carrot. As I have noted before, as an equestrian who owns and loves an actual horse, this horsey reference is especially compelling for me. My horse much prefers carrots to the swing of a stick, and I am rather generous with the former and make very limited use of the latter.

There are also arguments that soda taxes are apt to "kill jobs" by reducing sales, and that they are "regressive" falling hardest on those least able to pay.

The pros begin with a line-by-line rebuttal. We don't like paying taxes, but we all depend on some public goods that can be secured no other way, as noted above. The field of behavioral economics shows us clearly that carrots don't reliably work to change behavior, and that sticks or a combination of the two work far better.

Economies have not suffered where soda taxes have been levied; the matter has been studied.

What about the argument that such taxes are regressive? For one thing, the taxes in question are generally excise taxes, not sales taxes. The difference is important, in principle at least. An excise tax is imposed not on the buyer, but the seller, for the privilege of selling a product encumbered by adverse effects. There are excise taxes on tobacco, alcohol, gasoline, and gambling, for instance. Sellers might absorb such taxes by trimming their profit margins; the choice to pass the costs along to consumers is theirs.

Of course, they generally do.

Leveling the Playing Field

But the more important rebuttal to the argument of regressivity is that the sale of soda, like that of tobacco, is itself regressive—and profoundly so. In her book Soda Politics, for instance, Marion Nestle of New York University details how soda companies target their marketing efforts preferentially to those very communities most vulnerable to them, generally communities of socioeconomic disadvantage. One could even argue that the marketing of junk food and junk drink in America is informed by racial profiling.

Why is this regressive? Because those same communities suffer disproportionately from the ill effects to which soda decisively contributes, notably obesity and type 2 diabetes. Type 2 diabetes is monumentally more expensive in every way imaginable than the taxes added to soda, and this burden—both physical and financial—falls regressively on those least able to bear it. To the extent a soda tax diminishes such a burden, it stands to be the very opposite of regressive, helping to level the playing field.

Two more points before concluding. First, it is established fact that the modern food supply is willfully manipulated, even “engineered” by the world’s major manufacturers of food and drink to maximize the calories it takes to feel full, and thus maximize profit at the expense of public health in an age of rampant global obesity and diabetes. Arguments about exclusive reliance on personal responsibility for diet and health fall apart in light of such willful manipulation by powerful entities.

Second, despite our societal hand-wringing about rampant obesity and chronic disease among children and adults alike, there is little evidence that manufacturers are inclined to take any responsibility themselves. Just consider this image, created by a friend, which shows the new breakfast cereals introduced by two major companies in 2017.

Intended (and Worthy) Consequences

So, where do we land? Despite the many reasons to dislike taxes, I favor an excise tax on soda for all the same reasons I favor an excise tax on tobacco. Sales of the product are far more regressive than the tax. But the most important reason to support such a tax is the actual effects. Studies where soda has been taxed suggest declines in soda sales, but shifts to “better” beverages, with no adverse effects on retailers. Soda sales decline, and money is generated that can, and should, be invested into further public health gains. Soda excise taxes work as intended, in other words.

Modeling based on such effects shows the potential for far greater gains. Tens of thousands of lives could be saved annually in the United States through the effects of a modest soda tax alone. However, tens of thousands more lives could be saved with subsidies applied to fruits and vegetables. That money could come from a soda tax, among other places, and my view is we should by all means subsidize carrots as well as wield the stick of an excise tax.

Public health experts think soda taxes are likely to spread, and I support that. I encourage you to do the same—not because either of us likes taxes, but because we should like childhood obesity and type 2 diabetes even less. We should support soda taxes because they appear to work as intended, and as a basis for public health policy, epidemiology—what actually happens to people—should prevail over ideology.

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