Do Soda Taxes Hurt or Help Consumers?

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Do Soda Taxes Hurt or Help Consumers?

 

Philadelphia rang in the new year with a tax on soda and other drinks. With city residents living under this tax for three months, we can begin to see its impact. Some observers are happy with the changes it has brought to consumer behavior, but others are calling for an end to the soda tax.

 

One effect is clear: beverage sales are down. This makes sense, of course. Generally, if the price of a product goes up, sales decrease. Public health experts are no fans of sugar-sweetened drinks, so this could have a positive impact on health. However, some experts question whether the Philadelphia tax is written in a way that will have a significant impact, since it taxes drink volume (not sugar content) and also covers sugar-free and zero-calorie drinks.

 

The economics of the tax may be as unclear as its health effects. What is apparent is drink companies and other businesses are reporting a negative fallout from the tax:

 

  • Pepsi has stopped selling 2-liter bottles and 12-packs in the city. Pepsi also laid off 80 to 100 workers at a local distribution plant.
  • Temple University increased the price of its meal plan by almost 5%.
  • Canada Dry distributor announced it would cut its workforce by 20%.
  • A grocery chain said it would lay off 300 workers.

 

What do you think about soda taxes? Should government target these drinks to improve public health? Or should consumers (and workers) not be penalized for choosing certain drinks over others?

 

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