The endless substitution possibilities thwart the effectiveness of a soda tax. The policy’s fatal flaw is that a soda tax does not tax the actual problem policy makers want to discourage – obesity. Soda taxes do not change people’s incentives with respect to their total caloric intake, nor do soda taxes encourage individuals to exert more calories by exercising more.
Non-obese people also consume soda. Because soda is consumed by obese and non-obese people alike, non-obese people are being forced to pay the penalty but do not “commit the offense”.
In addition, focusing on soda ignores the research that links many other nutritional and lifestyle trends to obesity. Obesity trends have also been linked to fast food, portion size, prepared foods, a lack of fiber in the diet, video games, and the increasing sedentary nature of our lifestyle.
A careful analysis of the economics behind soda taxation illustrates that there is no a priori reason to believe that soda taxes will impact obesity at all. And, this is what the evidence shows.
Several states already tax soda and other “junk foods”, such as by imposing the state sales tax on these products while exempting most other food that is consumed at home. Obesity levels in the states that impose a tax on soda and junk food are just as high as those states that do not – in fact West Virginia imposes a tax on soda yet it has the third highest obesity rate in the country.
Nationally, total consumption of sugar-sweetened soda peaked in 1998. Despite the persistent decline in sugar-sweetened soda since 1998, total obesity rates have continued to grow at the same pace. Since the decline in soda consumption since 1998 has not yet impacted the obesity problem, it is difficult to argue that a policy that punishes soda consumers will now somehow impact it.
A tax on soda simply does not offer the health benefits its proponents advocate. As such, soda taxes should be viewed neither as a free lunch nor a public health program. Soda taxes are taxes and imposing another tax in the midst of a weak economy will create all of the negative consequences one would expect.