My Columbia colleague Sheena Iyengar (most famous among ARM readers for her speed-dating experiment) writes an interesting column on potential reactions to a tax on sugary drinks. The idea is that people might be so annoyed at being told what to do that they might buy more of the stuff, at least in the short term.
On the other hand, given the famous subsidies involved in the production of high-fructose corn syrup, soda pop is probably a bit cheaper than it should be, so maybe it all balances out?
I agree with Sheena that there’s something about loss of control that is particularly frustrating. One thing that bugs me when I buy a Coke is that I’m paying for the fees of Michael Jordan or whoever it is they have nowadays endorsing their product. I wish there were some way I could just pay for everything else but withhold the money that’s going into those silly celebrity endorsements.
I wish there were some way I could just pay for everything else but withhold the money that's going into those silly celebrity endorsements.
I believe that's called buying generic brands… unless your a connoisseur of the specific combination of artificial flavor, corn syrup, water, and CO2 that's used in the brands that pay for celebrity endorsements.
Maybe I am unique in this but I actually have come around to seeing a soda tax as a reasonable target for raising revenue. Given that one decides to raise taxes, the best things to tax are luxury items that are not required for daily living (alcohol and tobacco are examples). Pleasant as a soda is, one could drink water, tea or coffee.
Now, of course, there would be a point of diminishing returns. But it seems unlikely to cause harm to make the product marginally more expensive. If consumption goes up in the short term, it might also help address fiscal issues at the state level.
All in all, it seems like it is one of the better ideas to raise revenue out there.
"I wish there were some way I could just pay for everything else but withhold the money that's going into those silly celebrity endorsements."
Isn't this the point, or at least one of the points, of generic store-brand products? Their availability certainly depends on when and where you're drinking your soda, but it seems like it is at least frequently plausible to avoid the celebrity subsidy.
What can I say? I like Coke. I also like Grapette, which I've never seen any celebrity endorsements for, but basically costs the same as Coke.
I was recently in a city in a major wine region in the south of France. In the city center you could buy from a street vendor a can of soda for 2 euro ($2.70) or a 750ml bottle of wine for 5 euro ($6.70). Per ml they're basically the same price. The street vendors also would let you borrow real glasses to drink in the park.
But the soda industry is too powerful for it to happen in the US. Plus, I imagine that there would be a large shift to close substitutes like juice or iced tea which would get exemptions. These kinds of policies seem to me to be targeting the effect not the cause.
I also question the above claim that soda is a luxury good (by the economics definition). I believe it is an inferior good, that is, poor people drink more of it.
I have a counter-frustration, which is I wish I could pay entertainers more efficiently rather than through product-purchase. For example, comedien podcasts and academic blogs form a major share of my entertainment, but unlike my cable television bill, which is a relatively efficient payment for my channel-surfing entertainment, most comic podcasters and academic bloggers don't accept tips online. For example, this is a problem if I want to pay you or Adam Carolla -I'd have to buy your book to inefficiently support your podcast. As for pigovian taxes or what not, the cool thing seems for people to counterintuitively prove why they won't work, which might be useful, but of all the graduate school classes I had, one on the American tax system impressed on me how much that particular area needed systemic redesign by very smart people.
"I also question the above claim that soda is a luxury good (by the economics definition). I believe it is an inferior good, that is, poor people drink more of it."
When I wrote that I was thinking "non-necessity". To quote the ordinary language definition I was thinking of "a refinement of living rather than a necessity".
It's always tricky to carefully mark out where fields have technical definitions that conflict with ordinary language. But I agree the tax has the potential to be regressive in impact. But it's different than a food or income tax in that the needy can evade it by reducing or eliminating their use of soda.
Andrew, only about 5% of the Coca-Cola Corporation's expenses go to advertising, so who cares?
I think corn subsidies and sugar price supports should be eliminated. That would probably lead to soda being more expensive (or perhaps it would just be sweetened with sugar again, the way God intended), and would probably improve the federal budget. If, after this happens, there is still a perception that soda is so bad for people that it should have a special tax, I suppose it can be considered. But first things first. Sadly, this will probably not happen in my lifetime, because the low-population agricultural states have such ridiculously disproportionate representation in the Senate.
Phil: I agree with everything you say. Still, even that 5% bugs me. As you know, it doesn't take much to bug me.
Corn subsidies (reducing price of a sugar equivalent) and sugar price supports (increasing price of a sugar equivalent) have opposite effects on the price of sugar containing drinks.
Sugar received special exemptions for CAFTA, mainly under political pressure from Florida's sugar cane growers. I agree that government is easily swayed by special interest groups; I must object that this sway is due to 'the low-population agricultural states hav(ing) ridiculously disproportionate representation in the Senate.' In fact, the leading agricultural state with 13% of the US total, is California, followed by Texas.
Cody, corn subsidies and sugar price supports both serve to make sugar more expensive relative to corn syrup, so they don't work in opposite directions as far as what sweeteners go into soft drinks. You're right that they work in opposite directions on the price of soft drinks, though I think the corn subsidy is by far the larger effect. So I more or less agree with your first point.
Low-population states (agricultural and otherwise) do have ridiculously disproportionate representation in the Senate. More people live within ten miles of where I'm standing than live in the entire state of South Dakota, but South Dakota gets as many senators as my state.
California, Illinois, Ohio, and some other high-population states do indeed have large agricultural industries, but they also have large non-agricultural industries so they are less dependent on ag subsidies. But Iowa (producer of 18% of the corn in the U.S.), Nebraska (11%), Minnesota (9%), South Dakota (5%), Kansas (4%), and Wisconsin (3.5%) are much more agriculture-dependent. Those states combine to grow 50% of the corn in the U.S. (I think that means they get about 50% of the corn subsidies, though I don't know that for sure). Those states have 6% of the U.S. population, and 12% of the senators. At the other extreme we have New York, with 26% of the U.S. population and 2% of the senators.
So, I stand by my claim, although perhaps I should have phrased it slightly differently: I don't think corn subsidies will be eliminated in my lifetime because agriculture-dependent states are ridiculously over-represented in the Senate.