The Soda Tax Is Gathering Steam

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Here’s how it works with new public health ideas:

Some policy wonk at Harvard dreams it up, but it just sits there in Ivy Tower-land for a long time. Then the idea gets discussed in the press, but most people dismiss it as being far-out. And then it’s debated for real, and next thing you know it’s policy.

And so here we are with the soda tax, which has companies like Coca-Cola (KO) screaming bloody murder, but which is starting to get some serious play in the press and among politicians.

What should be scary for the soda industry is that new research suggests the tax would be highly effective at both raising (much-needed) revenue and discouraging consumption (which would have the follow-on effect of reducing obesity and diabetes-related healthcare costs).

A new study came out yesterday in the New England Journal of Medicine.

NYT: The study cited research on price elasticity for soft drinks that has shown that for every 10 per cent rise in price, consumption declines 8 to 10 per cent.

John Sicher, the publisher of Beverage Digest, a trade publication, said that a two-liter bottle of soda sells for about $1.35. At 67.6 ounces, if the full tax was passed on to consumers, that would add 50 per cent to the price. A 12-can case, which sells today for about $3.20, could rise by $1.44, a 45 per cent increase.

“A one cent per ounce tax would create serious problems and potentially adversely impact sales for the American beverage industry,” Mr. Sicher said.

Obviously, taxing soda is going to be politically difficult. We’ve suggested in the past that they should get rid of the cigarette tax and replace it with a soda tax, but that’s probably not realistic, given that cigarette taxes are levied in a patchwork of state-by-state laws.

More realistically, how about we just start eliminating any subsidies that go towards high-fructose corn syrup? That would also raise prices, and the soda industry would have a much harder time complaining.