New York Soda Tax

This from the Financial Times:

“New York state could impose an “obesity tax” on high-calorie soft drinks such as non-diet versions of Coke and Pepsi as public concerns over obesity turn potentially fattening foods into a politically acceptable target for taxation.

A number of US states have sales taxes on soft drinks, sweets and snacks, while most other foods are tax-exempt. But New York’s proposals would be the first to distinguish between “diet” and “non-diet” products. It would also double the existing 7.5 per cent sales tax, already one of the highest in the US, potentially raising over $400m.”

This is the classic exam of bureaucrats and politicians using Science to propose legislation. I am sure that Coke or Pepsi makes people fatter than Diet versions. This would only make sense because there are zero calories in Diet and greater than zero for regular versions.

First, will it work? I would imagine that it would work and that many people would shift their consumption. This makes sense because anytime you raise taxes on something, people will economize. Now the Governor cites this tax to try and raise revenue. If your purpose is to shift consumption then that will mean the tax will not bring in more revenue. People will avoid creating revenue by shifting. This is somewhat of the Laffer curve effect.

A major problem with this is that it puts a burden on the business owner. They would have to keep a record of how many regular sodas are sold so that the avoidance of the tax isn’t done by the business owner. Another problem is that some businesses like McDonalds would either have to eliminate serve your own drink fountains or charge everyone for the tax. All of these put an extra cost on the business owner thus raising the cost of all the drinks and food.

So prices will go up for all regardless. How about if you want to lower the deficit, lower the spending?

The rest is here.


Published in: on December 19, 2008 at 12:58 am  Leave a Comment  
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