The relatively recent decision by New York City to place restrictions on the size of soft-drinks has brought the debate over government imposed actions designed to benefit the health of its citizens to the fore-front of the political theatre. Various groups are proposing different systems that would allow for increased taxes on beverages which are deemed to be not healthy. The following addresses one of these proposed tax systems, and looks at what its impact could be on consumers.
The issue of The New York Times reports that taxing soda based on its calorie count could be a more effective system at reducing consumption of these drinks when compared to a tax on the size of the beverage. This report is directly based on the results of a study funded by the Robert Wood Johnson Foundation, a long-time proponent of taxing sugary drinks. The study says that when compared to a tax on the size of the beverage, taxes based on calorie count lead to a 0.6% increase in the effectiveness of preventing consumers to buy these sugary drinks. According to the NYT some argue that this tax system would be beneficial to consumers:
A calorie-based taxing system would also be fairer to consumers, said Chen Zhen, a research economist at the food and nutrition policy research program at Research Triangle Institute and the lead author of the study.
“It provides a better incentive to the consumer to switch to lower-calorie drinks, which would be taxed at a lower rate than higher-calorie drinks,” Dr. Zhen said. “One of the concerns about taxing ounces of sugar-sweetened beverages is that consumers are paying the same tax whether they buy 12 ounces of a drink with 150 calories or 12 ounces of a drink with 50 calories.”
However, there also is the potential that this tax system could adversely affect consumers. Large beverage companies, such as Coca-Cola, would perhaps be forced to raise prices of their beverages in order to make up lost revenue if this taxing system were to be put in place. This could lead to the price of a 12-ounce soda drastically increasing in addition to the tax. This would be detrimental to consumers who wish to enjoy a high-calorie beverage, as they would be forced to pay significantly more to do so.
While this system has yet to be put in place, it is important for consumers and the government alike to realize the effects that this system would have. Understanding that this type of tax system can have both benefits and drawbacks for the consumer needs to be an important part of the discussion of this tax system in the future.
Read More Here- “Study Examines Efficiency of Taxes on Sugary Drinks” (Stephanie Strom, The New York Times)