You can’t tax people out of their sugary drinks
The Progressives’ war on soda pop is fizzling out.
That’s the chief finding of a new study on the public health effects of soda taxes from economists at Cornell University and the University of Iowa. The researchers looked at soda taxes in four cities — and found that they yielded almost zero benefit to public health. The average resident’s daily caloric intake declined by, at most, five calories. That yielded weight loss of just half a pound.
This analysis offers yet more evidence of the nanny state’s ongoing failure to deliver the public-health gains it promises — even as it imposes significant costs on individual Americans.
The typical soda tax attaches a one or two-cent charge per fluid ounce to any sugar-sweetened beverage — from juice and sports drinks to iced coffee and soda. The government collects the tax from retailers, who pass the expense along to consumers in the form of higher prices.
Over the last decade, soda taxes have swept through left-leaning cities, including Oakland, Calif.; Philadelphia; Boulder, Colo.; Chicago; San Francisco; and Seattle. Just last month, legislators in the District of Columbia introduced a bill that would impose one of the highest soda taxes in the country — and raise the price of a two-liter bottle of soda by a full dollar.
All these measures ignore a damning fact — soda taxes don’t work. They may displace soda sales. But they don’t typically reduce them. Consumers adapt by simply going outside the city limits to get their drinks. In some cases, consumers just switch to even less healthy beverages.
In Philadelphia, the tax cut local soda sales by about one-fourth. But sales went up by almost the exact same amount in the areas immediately surrounding the city.
The story was the same in Chicago. One store set up signs directing customers to alternative locations just outside the city. The tax ended up reducing its urban soda sales 34 percent. But its sales outside the city limits increased 38 percent. The “pop tax” proved so unpopular among Chicagoans that city officials scrapped it after only a few months.
In Seattle, one convenience store located just a couple feet beyond city limits actually erected a marquee advertising: “GET YOUR DRINKS HERE. NO SUGAR TAX.”
In some cases, people responded to taxes on soft drinks by switching to the harder stuff. An analysis by researchers from Cornell and Ohio State University revealed that a 10 percent tax reduced soda purchases in the short term — but caused people to buy more beer.
While soda taxes fail to improve public health, they do serious economic damage to local businesses. Convenience stores, for instance, are heavily dependent on revenue from soft drink sales. If those sales decline, retail employees could find themselves out of work.
Philadelphia’s tax forced Pepsi to lay off 20 percent of its workforce in the city. All told, the tax destroyed nearly 1,200 jobs and reduced labor income by $54 million. The resultant decline in economic activity from all those job losses was $80 million.
Ironically, by wreaking so much economic havoc, the soda tax reduced Philadelphia’s overall tax take by $4.5 million.
There’s a broader lesson here. Progressives are increasingly enamored of centrally planned healthcare programs; witness the surging enthusiasm for Medicare for All among many of the Democratic Party’s leading lights. They’re pushing for government micromanagement of every aspect of health care, from benefits packages to prescription drugs.
These efforts will meet the same fate as the soda tax — a failure to improve public health, at great cost.
Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is The False Promise of Single-Payer Health Care (Encounter). Follow her on Twitter @sallypipes.