Tuesday’s New York Times had a terrific article by David Leonhardt on The Battle Over Taxing Soda. Leonhardt does a wonderful job arguing in favor of a soda tax (currently being considered in DC), drawing parallels to cigarette and alcohol taxes.
What struck me most was the shocking chart at the top. Not only has the price of carbonated non-alcoholic drinks dropped by 34% since 1978 (adjusted for inflation and relative to other foods), but fresh fruits and vegetables have also become substantially more expensive than they used to be.
This penny-per-ounce tax would essentially bring the cost of soda back to where it was in 1978 (in today’s dollars).
He also made a couple of key points regarding taxation-as-deterrent, that were rather salient:
(1) Taxes should be levied on products and services that have an inherent cost to society (in this case, healthcare), in order to deter people from purchasing those items and to help offset the costs.
(2) The tax increases must be large enough to reduce consumption or they only serve to burden the consumer financially.
Oh, and here’s a followup article from Wednesday’s NYT, saying that they’re now considering not including diet sodas in a proposed tax for New York.