The Battle Over Taxing Soda is a rare glimpse at politicians applying legitimate economic concepts to real world problems. Taxing goods with negative externalities can improve social welfare and raise tax revenues all at the same time. Now that it is pretty well established that Cokes and Pepsi and lots of other drinks carry negative externalities, let’s tax soda-pop.
Cities and counties, desperate to find money to pay for schools and roads, are starting to see a soda tax as a way to raise revenue. The tax also appears to be one of the most promising ways to attack obesity, given the huge role sugary drinks play in the epidemic.
“It’s wrong for the government to stand idle in the face of an epidemic of obesity that’s hurting the quality of life and the health of our residents,” says Mary Cheh, the Council member who has proposed the tax, “when we have policy choices in front of us that can materially affect the problem.”
Of course the drink manufacturers are not going sit on their hands and wait to see what happens. Industry lobbyists have already defeated soda tax proposals in New York and Philadelphia, now working their magic in Washington.
The soda industry, of course, is fighting back with newspaper and radio advertisements, among other things. It says a tax would most hurt “hard-working, low- and middle-income families, elderly residents and those living on fixed incomes” and would destroy jobs. Ellen Valentino, an industry official, recently told The Washington Post that companies would spend “whatever it takes” to make their case.
It is true that a soda tax would probably be extremely regressive, but–like with taxes on alcohol and tobacco–people still have the choice to pay or not.