THE STASH JUNE 8, 2009
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We learned last month that one of the ways the Congress is considering paying for health care reform is through a tax on "sugar-sweetened beverages."
While a soda tax would no doubt accomplish that, would it also achieve another desirable goal: promote healthier behavior on the part of consumers?
Superficially, you'd think that raising the cost of high-caloric sodas would induce people to consume them less--and maybe shed a few pounds in the process. But a new NBER study suggests that the relationship between such sin taxes and consumer behavior isn't always as predictable as you'd think.
Looking at data between 2000-2005 from a national survey on adult health, Melayne M. McInnes of the University of South Caroline and Judith A. Shinogle of the University of Maryland report that two types of sin taxes currently in existence--taxes on beer and cigarette--are actually associated with certain less healthy behaviors. In particular, higher sin taxes coincided with a drop in the intensity of physical activity.
On the other hand, another new study by Lisa Powell and Frank Chaloupka of the University of Illinois found that higher vegetable and fruit prices were correlated with higher BMIs (body mass index) for poorer children. So perhaps one way to spend the proceeds from a soda tax would be to subsidize healthier food options for low-income families.
--Zubin Jelveh
9 comments
I just looked at that "sugar-sweetened beverages" link and it blew my mind. It's a little misleading to call this a soda tax, because diet soda is exempt and NOT exempt are fruit juice, gatorade, and coffee. That's not going to go over too hot
- Simon Greenwood
June 9, 2009 at 12:23am
Juice and most gatorade should be on there, they are sweetened. In the case of some juices, heavily sweetend. Since it's suppossedly made from "fruit" a large number people drink it soley thinking that it's healthy. If you look at the ill-effects of fructose (esp on TG metabolism) these taxes make sense and are needed. However, stay away from the coffee.
- wroth2
June 9, 2009 at 12:36am
To be clear, simon, the proposal would not tax all fruit juice and coffees. Only those that have sugar added upon manufacturing. So, natural OJ wouldn't be taxed. Only if sugar were "unnaturally" added at some point before packaging would such a tax apply.
Same thing with coffees. Your mocha at Starbucks won't be taxed. You'll only get hit with a tax if you buy a pre-packaged coffee drink (made at the factory, so to speak) that has sugar added.
But, yeah, Gatorade gets hit.
- prendergast
June 9, 2009 at 12:45am
ZJ:
"While a soda tax would no doubt accomplishthat, would it also achieve another desirable goal: promote healthier behavior on the part of consumers?"
george:
Not sure if this is true, but I once read that, paradoxically, encouraging people to be more proactive in taking care of their health...exercising, eating right, controlling stress, preventive check-ups, no smoking, drinking etc....is actually, in the long run, more taxing on the health care budget. Why? Because it prolongs people's lives and the older people get the more likely they will need expensive, geriatric procedures, no matter what their health care regimen.
After all, once you die the health care costs for the rest of us drops dramatically, right?
george
- iambiguous
June 9, 2009 at 1:27am
A tax on sweetened foods is effectively a corn tax. But rather than taxing corn sweetener and using some of the revenue to subsidize fruits and veggies, wouldn't it be better to simply stop subsidizing corn? Then you wouldn't have to subsidize strawberries and lettuce, because Twinkies would no longer be cheaper than real food. It seems maximally inefficient to subsidize the production of something only to tax the commercial use of it.
Since our subsidies to agribusiness contribute mightily to obesity and diabetes, reducing those subsidies ought to be considered "health-related savings" for the purposes of Congress paying for health care reform with health-related revenue measures.
- rhubarbs
June 9, 2009 at 8:10am
prendergast: Thanks for the explanation. That sounds much better than what I thought it was.
- Simon Greenwood
June 9, 2009 at 9:46am
On its face, I'm in support of things which build in the "down the road" costs of things we purchase and use. In addition to seeing "sweet taxes" to mitigate health-care costs, I'd also be interested in a tax on autos based upon their fuel consumption. As Bill Maher once said, it costs a lot of money to go find oil deposits and then kill the people living on top of them. Our insatiable need for oil plays a large role in our need to entangle ourselves in developments in the mid-east which, in turn, plays a large role in our need to maintain a massive military. And all of those Hummers, Avalanches, and Escalades play a larger role than most in that thirst for oil.
This is not a *completely* alien concept. PC makers now charge disposal fees on new computer purchases... effectively pre-charging for some of the disposal costs of the unit when you decide to toss it. I just don't think we've seen it done on a large scale (in terms of dollar amounts)... except tobacco, which I consider to be an exception since, unlike sodas and syrupy fruit drinks, are regarded by most as a disgusting habit.
- jemenake
June 9, 2009 at 8:02pm
Rhubarbs: The cost of the corn in a can of soda represents less than 2% of the cost of manufacturing the soda. Assuming the market works (always a dangerous assumption in agriculture, to be sure), and given our supply of arable land, it's reasonable to conclude that the price of corn in an unsubsidized market would settle at a level where producers make a reasonable return on investment, but not a killing (because if they did, more people would plant more corn, and bring the price down). I don't know what that price is, but it's not 3X even what the subsized price is. So just ending corn subsidies might add a fraction of a cent to the cost of manufacturing a can of soda. Probably not enough to change consumption habits.
- sdemuth
June 9, 2009 at 9:13pm
King Korn delenda est. Stop shredding NAFTA and devastating the Mexican countryside.
A large part of the reason we've imported a second underclass is our insane policy of dumping subsidized corn in Mexico, of all places.
- teplukhin2you
June 10, 2009 at 1:22am