The Philadelphia City Council has voted to become the second city in the United States to impose a tax on the sale of particular types of sweetened beverages. The tax applies to sugared soda, diet soda, sports drinks and more, while excluding drinks that are more than half milk or fruit, as well as drinks to which sugar is added such as coffee. The tax will be 1.5 cents per ounce, amounting to 18 cents per standard size can of soda or $1 per two-liter bottle.
Public health advocates often propose taxes on sugary drinks, colloquially known as “soda taxes,” as a means of improving public health outcomes. They argue that such beverages disproportionately cause obesity and that consumers of sugary beverages impose external costs on others through higher medical costs associated with obesity.
The evidence supporting the disproportionate effect of sugar beverages on obesity is not powerful. An article in Obesity Review concluded, “The current evidence does not demonstrate conclusively that nutritively sweetened beverage consumption has uniquely contributed to obesity or that reducing NSB consumption will reduce BMI levels in general.”
And the externalities of the obese also appear to be minimal. “The existing literature … suggests that obese people on average do bear the costs and benefits of their eating and exercise habits.”
But for purposes of discussion assume that consumption of such beverages does result in obesity and its health effects, which, in turn, create costs for others. Are the taxes a good corrective?