StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Soda Tax, and How About A Chip Tax Too?

21 May 2009
Posted by Pete Davis

The most popular tax hike proposal on Capitol Hill these days is the soda tax.  The Congressional Budget Office identified it last December as a twofer:  it raises revenue and combats obesity at the same time.  See Option 106 on page 192.  New York Times columnist David Leonhart wrote an excellent analysis of it yesterday.  The plan is to use this to pay for health care reform.  If it were up to me, I'd add a chip tax too.

Twice a week I tutor inner city children over the lunch hour.  It's a Title 1 school, which means their lunches are provided by the Department of Agriculture without charge from agricultural surplus.  I sit upwind so I don't get sick.  At least they serve subsidized milk instead of soda.  But many kids are obese anyway because they crave chips.  If your diet consisted of soda and chips you be 50 pounds overweight and a candidate for diabetes too.  Every day I tell young kids, "Don't eat chips," but they do anyway.

Leonhardt cites work by Yale obesity Professor Kelly Brownell and New York City Health Commissioner Thomas Frieden on the effects of soda.  Feeding 190 calories of sugar a day on average is literally killing people.  The Wall Street Journal had a good article on this on May 12.

Leonhardt's article contains an excellent graph, courtesy of Haver Economics, showing the relative prices of sodas versus fresh fruits and vegetables.  You guessed it: since 1978, the relative price of fresh fruits and vegetables has risen 218% versus sodas.  Soda prices have declined by 33% over that time.  Relative prices matter.  People substitute cheaper food for more expensive food, not realizing that it will kill them in the end.

I'm not holding my breath in hope Congress might actually adopt this tax -- Coke and Pepsi are hardly without power in Washington -- but it's a good idea anyway.



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