You may hate them, but soda taxes are good for you.
“The benefits of sugar-sweetened beverage taxes probably exceed their costs,” concluded three economists in a recent paper for the National Bureau of Economic Research. “The optimal tax is not zero and may be higher than the levels in most U.S. cities to date.”
That wording may be bloodless, but the conclusion is important, given the rising popularity of these taxes. In recent years, at least seven U.S. localities and nearly 40 countries have imposed some sort of tax on sugar-sweetened beverages.
Judging by consumption patterns, at least some of these taxes seem to be working. After Philadelphia imposed a relatively high-rate soda tax in 2017 (1.5 cents per ounce of taxable beverage), annual sales fell by 1.3 billion ounces — a whopping 51 percent. Of course, consumption climbed in nearby localities that didn't impose a soda tax. But even accounting for that sort of “leakage,” consumption in Philadelphia dropped by 38 percent.
It’s hard to argue with results like that. Unless you’re one of the people actually paying the tax, in which case you probably have some choice words for lawmakers.
In a recent Pew poll, 65 percent of Philadelphia residents said they disapproved of the city’s beverage tax, while just 31 percent supported it. Opinion varied dramatically across educational, economic, geographic, and racial lines. As Pew explained:
Approval of the tax was relatively high among those who have lived in the city 10 years or less (48 percent), college graduates (46 percent), and individuals with household incomes of $100,000 or more (39 percent). The levy faced strong disapproval from those with a high school diploma or less (77 percent), residents of Northeast Philadelphia (76 percent), and African-Americans (71 percent).
These numbers should worry fans of anti-sugar sin taxes. The Philadelphia tax is generally unpopular with voters in every group and specifically unpopular with those who actually pay most of it. The tax seems to strike these consumers as both oppressive and paternalistic.
“In my district, 95 percent of the residents hate it,” complained Philadelphia City Council member María Quiñones-Sánchez in comments to The New York Times. “The people who buy $7 lattes say the poor should be drinking water, but no one is considering the fact that my constituents live in food deserts with no access to fresh fruit and vegetables.”
The economists writing for NBER tried to push back on such complaints, chiefly by grounding their argument for soda taxes in terms of externalities (costs imposed on the health system by sugar-heavy diets) and internalities (costs consumers impose on themselves by making poor decisions). By raising the cost of sweetened beverages, a soda tax can help account for these hidden costs.
But sin taxes — like all taxes — are creatures of the political system, not economics departments. And politically, most sin taxes strike voters as paternalistic.
Some sin taxes, of course, are well-tolerated, including those on alcohol and tobacco. But those levies are ancient, dating to the nation’s earliest decades. Their age gives them legitimacy, as does the broadly accepted notion that both alcohol and tobacco are genuinely bad for you.
The political consensus supporting soda taxes is much, much weaker. While scientific evidence supports the idea that sugar is notably (if not uniquely) unhealthy, popular opinion hasn’t caught up with that assessment.
It’s too early to say whether soda taxes are on their way toward broader acceptance. Many of the polls seeking to gauge that support have been funded by the soda industry, making their conclusions more than a little suspect.
But Philadelphia’s two-year experiment with a soda tax demonstrates both the efficacy and the unpopularity of such levies. It’s safe to say that champions of taxing soda have a ways to go in making their case to the public.
Because the first thing you need for a sin tax is something people think is actually a sin.