Prompted by Chicago Mayor Rahm Emanuel’s call for new ideas to pay for the city’s $63 billion debt burden, Alderman George Cardenas (D-Ward 12) is proposing a 1-cent-per-ounce tax on the price of soda and other beverages containing more than five grams of sugar per 12 ounces.
If enacted, the soda tax would increase the cost of a two-liter bottle of soda by about 68 cents and increase the price of a 24-pack by $2.88.
Assumptions Are Unrealistic
Michael Thomas, an assistant professor of economics at Creighton University, says the proposal relies on unrealistic assumptions about consumers’ behavior.
“What they are doing here is saying, ‘If we raise the price, then people will shift away from these kinds of foods,'” Thomas said. “They think it will result in a 23.5 percent reduction in consumption. Those types of predictions don’t actually happen.”
Thomas says the sugar tax plan will drive people to consume other kinds of sweet drinks, instead of improving public health.
“People have habits, and one thing about this bill is that they specifically exempt some types of beverages, so they might be driving some to consume beverages with a certain type of sweetener,” Thomas said.
Education, Not Taxation
Michael Lucci, vice president of policy at the Illinois Policy Institute, says lawmakers concerned about public health should try educating people, not taxing them.
“The solution to this is educational,” Lucci said. “We must allow consumers to choose what they want and allow for education about what these products contain. This is just a tax hike masquerading as social welfare policy.”
‘It Insults People’
Lucci says people are better than lawmakers at deciding what’s good for them.
“Frankly, it insults people, because people can decide what they should do for themselves,” Lucci said. “If you are going to collect taxes, spread it out fairly and evenly across all people, so if it’s going to be a consumption tax, put it on the general sale side, don’t put it on a specific consumer item, because it’s the government getting involved in individual decisions and hurting or helping a certain producer.”
If sugar taxes were effective at improving public health, lawmakers would not use them, Lucci says.
“This is not about helping people become healthier; it is about getting tax dollars,” Lucci said. “If the tax actually worked to discourage consumption of these products, they wouldn’t get the tax revenue, and I guarantee you they will then find some other way to get tax revenue.”
Jen Kuznicki ([email protected]) writes from Hawks, Michigan.
Francesca Colantuoni and Christian Rojas, “The Impact of Soda Sales Taxes on Consumption: Evidence from Scanner Data,” Contemporary Economic Policy: https://www.heartland.org/policy-documents/impact-soda-sales-taxes-consumption-evidence-scanner-data/