Budget & Tax

Tax Foundation explains soda tax flaws

March 27, 2017

Curtis Shelton

A new article from the Tax Foundation challenges the idea that soda taxes are an effective way to raise revenue and improve public health. Just as many other sin taxes, a soda tax is regressive as low income families spend more of their budget on soda than high income families. This is usually justified by pointing to the health benefits the tax has, but these health effects are questioned by scholars. The article quotes a study from the University of Massachusetts, which points out that “the many available soda substitutes may render soda taxes ineffective, in that consumers will replace highly- taxed beverages with low-tax alternatives with the same health consequences.”

The impact on state budgets is also questionable as the revenue brought in falls as the use for the product falls due to higher prices. These high prices in turn will affect small businesses in the community who have to cut jobs in order to deal with a drop in sales. Soda taxes are at best short- term solutions with diminishing effects on state revenues, but they do put more stress on local businesses and consumers. If the role of government is to protect individual rights and freedoms, politicians should not be making policies that manipulate people’s choices or target particular citizens for exercising those freedoms to pay more than their fair share of the cost of government.