Is Taxing Obesity Away Feasible?

Governor Paterson of New York City has proposed a tax on sugary soda drinks in order to simultaneously raise money for the government and fight off the rising rates of obesity.

At a rate of one cent per ounce, a 12 ounce soda can would see an increase in price of 12 cents. My question for proponents of this tax is whether 12 cents is truly going to hinder a mass amount of people from drinking more soda. Furthermore, even if it did decrease consumption of soda, would it really have a profound effect on reducing obesity, or for that matter, any effect at all on obesity rates?

According to a study at the University of Illinois in Chicago, the effect of this tax on diets will be miniscule. The press release of the study stated, “Previous economic studies suggest that food prices do change consumption. However, the researchers want to determine if, for example, consumers will seek out another high-sugar drink such as Kool-Aid if, say, soda is too expensive. If they do, then a tax on soda may reduce soda consumption but will not necessarily reduce weight, improve diet quality, or reduce overall sugar intake.” People will find substitutes to replace the sugary drinks so that even if consumption decreases, obesity rates will likely remain unchanged.

A tax on soft drinks is as regressive as it gets considering the highest proportion of soda drinkers are in the lower income brackets. Similar to the federal tax hike on cigarettes, this tax puts a greater portion of the burden on the poorer consumers in America.

Pigovian taxes such as the soda tax are self-contradictory. If the intent is to change unhealthy habits and the tax succeeds in doing so, the projected revenue from the tax will not be received since no one will be drinking soda. If the government’s goal to raise revenue is attained, then no behavioral change will occur and the healthy benefits promised from proponents will not be seen.

A tax on soda would likely not accomplish the intended results of decreasing obesity and would harm the lower income sectors due to the regressive characteristics of the tax.

Tags: ATR, AS, NewYork

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