Will Taxing Soda Deter Its Consumption?

By admin | December 8, 2011

Photo: Wyscan

By: Saira Malhotra

When a product is deemed harmful, we know from childhood that being lectured doesn’t make it a deterrent. That’s when the invisible hand comes into play – sin taxes. Levied on cigarettes and alcohol, the objective is to reduce the number of transactions. Does it work? According to various supermarket and green market vendors, the $14 cigarette packet has less of an audience than it once did.

This week, Time Magazine’s ‘Heathland’ took a closer look at how a price hike in soda would impact supply chain participants. In the past the view has been to reprimand the client by raising taxes on those commodities or inhibiting their purchase through food stamps. The angle being taken is different this time.

Iowa State University affirms that while taxation plays a key role, the burden should not be passed to the consumer. Economists Helen Jensen and John Beghin feel that the recipient of these taxes should be the manufacturers who can then pass on some of it in a watered-down way to others in the supply chain. The study which was published in the Contemporary Economic Policy indicates that the government will regulate which sweeteners a soda company can use for the beverages through varying tax levels. Such initiatives will ultimately incentivize manufacturers to seek healthier alternatives that serve to reduce calories and improve the way the body metabolizes those calories.

While this doesn’t address all the junk food challenges this country faces, it is a step in the right direction and provides a model for other businesses to follow suit.

Photo: Wyscan 

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