Hunt Allcott, Benjamin B. Lockwood, and Dmitry Taubinsky, “Should We Tax Sugar-Sweetened Beverages? An Overview of Theory and Evidence.”
Journal of Economic Perspectives 33(3): 202-227, Summer 2019.
• Some US cities, and many nations, tax beverages with added sugar; often such drinks do not receive the favorable tax treatment otherwise provided to groceries, too
• In the US, consumption of sweetened beverages falls with income, and the top 20% of consumers drink a lot of soda
• Associated health risks include weight gain, type 2 diabetes, and cardiovascular disease
• Fiscal externalities abound throughout the health care “system," so someone's unhealthy behavior is in part paid for by others. [Nonetheless, I am very wary of justifying policy on the basis of such fiscal externalities, in part because they seemingly justify any draconian measure. Your lack of exercise is costly to me! You must be coerced to exercise more and to eat in a more healthy way! Perhaps our willingness to provide subsidies for those in health crisis is predicated on the notion that we don't ask too many questions of how they got in such dire straits.]
• Sugary drinks also present the potential for internalities, perhaps emanating from poor information or present bias or addiction or some other rationality shortfall
• The monetary incidence of a soda tax is likely to be regressive; do the internality benefits reverse the full incidence of such a tax? (That is, those who consume the most will pay the most tax, but (presumably) also receive the lion's share of benefits in the form of better health down the road from reduced soda consumption.)
• Soda tax revenues can be earmarked for programs benefiting people who pay the taxes, but if those programs are desirable, they should be funded anyway, and not have their funding dependent on a single dedicated revenue source.
• Perhaps 1-to-2.1 cents per ounce is an “optimal” soda tax?
• Lessons? (1) Focus on the externalities and internalities (therefore…); (2) target those consumers who present the largest ex- and in- ternalities; (3) Implement the tax in terms of grams of added sugar; (4) Diet drinks and fruit juices are another story; (5) Be sophisticated about incidence; (6) Reduce avoidance through statewide (not municipal) taxes; and... (7) Reasonable soda taxes probably bring net social benefits.
• Here's a previous outline of an article on the sweetening of diets.
• Some US cities, and many nations, tax beverages with added sugar; often such drinks do not receive the favorable tax treatment otherwise provided to groceries, too
• In the US, consumption of sweetened beverages falls with income, and the top 20% of consumers drink a lot of soda
• Associated health risks include weight gain, type 2 diabetes, and cardiovascular disease
• Fiscal externalities abound throughout the health care “system," so someone's unhealthy behavior is in part paid for by others. [Nonetheless, I am very wary of justifying policy on the basis of such fiscal externalities, in part because they seemingly justify any draconian measure. Your lack of exercise is costly to me! You must be coerced to exercise more and to eat in a more healthy way! Perhaps our willingness to provide subsidies for those in health crisis is predicated on the notion that we don't ask too many questions of how they got in such dire straits.]
• Sugary drinks also present the potential for internalities, perhaps emanating from poor information or present bias or addiction or some other rationality shortfall
• The monetary incidence of a soda tax is likely to be regressive; do the internality benefits reverse the full incidence of such a tax? (That is, those who consume the most will pay the most tax, but (presumably) also receive the lion's share of benefits in the form of better health down the road from reduced soda consumption.)
• Soda tax revenues can be earmarked for programs benefiting people who pay the taxes, but if those programs are desirable, they should be funded anyway, and not have their funding dependent on a single dedicated revenue source.
• Perhaps 1-to-2.1 cents per ounce is an “optimal” soda tax?
• Lessons? (1) Focus on the externalities and internalities (therefore…); (2) target those consumers who present the largest ex- and in- ternalities; (3) Implement the tax in terms of grams of added sugar; (4) Diet drinks and fruit juices are another story; (5) Be sophisticated about incidence; (6) Reduce avoidance through statewide (not municipal) taxes; and... (7) Reasonable soda taxes probably bring net social benefits.
• Here's a previous outline of an article on the sweetening of diets.
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