India’s finance minister this week released a budget that includes, among other things, a five per cent reduction in the corporate income tax. Narendra Modi, the Prime Minister of India, won a landslide election last May...
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Councilmembers in Baldwin Park, California Put Kibosh on Soda Tax Proposal
Last Wednesday, Baldwin Park councilmembers shot down Mayor Manuel Lorenzo’s proposal to issue a staff report about the merits of putting a soda tax on the November ballot. According to the San Gabriel Valley Tribune, three councilmembers said they would not support a measure they knew so little about and were also wary of the fact that they would have to declare a state of fiscal emergency to qualify the tax proposal for the November ballot.
Both Richmond and El Monte, California will have $0.01/ounce soda tax propositions on their November ballot, and over the past few weeks we’ve been preparing a paper analyzing how a tax like this would affect those localities in particular. But in the meantime, there are some insights we can glean from academic research that point strongly to the conclusion that soda taxes are not affective at reducing obesity and may result in other unintended consequences.
Fletcher, Frisvold and Tefft found in 2010 that taxing soda does indeed reduce the consumption of soda, but that adolescent consumers are likely to perfectly substitute other calories in place of soda, meaning there is no net change in caloric intake from a soda tax. The authors also noted that if consumers switched from soda to milk, calories consumed could actually increase.
An article released this May found that soda taxes actually incentivize consumers to switch to beer, which can have more calories than soda as well. This raises concerns about potentially switching one public health problem for another.
On top of all this academic analysis though, I think there is a lot of intuitive logic behind the idea that people switch to other caloric beverages when the price of soda is higher. The last time I was in Europe, I remember being surprised at sodas on restaurant menus for 4 euros. I remember thinking to myself, “at that price, I might as well get a beer.” Looks like other people think like me too.
Regardless of the impact that a soda tax might have on body mass index, in the end, it comes down to somewhat of a moral question of how we want to structure our tax code. Is it fair to single out good products and bad products, taxing some and subsidizing others? I’ve generally found that choices about our diet are dependent on too many factors (individual metabolism, personal exercise patterns) to be manipulated by using crude tax policy levers.
More on sugar and snack taxes here.
Follow Scott Drenkard on Twitter @ScottDrenkard.
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