Jun 19, 2019 | Updated: 09:31 AM EDT

Economists Discover Net Benefit in Soda Tax

May 20, 2019 10:54 AM EDT

Economists Discover Net Benefit in Soda Tax
(Photo : Image by Igor Ovsyannykov from Pixabay)

As an assessment of which is based on an analysis of health benefits and consumer behavior, a group of economists has concluded that soda taxes serve as a "net good." The research reveals advantages similar to those of long-standing cigarette taxes, also provides policy parameters that it views as more effective than many existing soda taxes.

The researchers at New York University analyzed the Wharton School at the University of Pennsylvania, and the University of California, Berkeley, was released today as a National Bureau of Economic Research (NBER) working paper.

Hunt Allcott from NYU, Wharton's Benjamin Lockwood, and UC Berkeley's Dmitry Taubinsky said that the research is clear that sugary drinks are bad for our health. Their study takes the next step to evaluate the overall economic rationale as to whether they should impose a tax. They utilized a financial framework and showed that taxing soda generates net benefits to society, taking into account the health effects, the enjoyment that individuals get from drinking the drinks they enjoy, the value of the tax revenues, and other factors.

In its estimate, each year, the research approximates that a nationwide soda tax would yield $7 billion in net benefits to society. Also, the study considers concerns about regressivity.

According to researchers, they estimate that soda taxes benefit both low-and-high income people. Though individuals with low-income drink more sugary drinks and thus pay more in soda taxes, their health also helps more from drinking less. Also, the researchers discover that state-level taxes would be even more effective than city-level taxes, such as those implemented in San Francisco, Philadelphia, and other U.S. cities.

The authors of the study observed that soda taxes would yield more benefit at the state level than they would at the city level, both because they cover more people and because buying tax-free soda just outside the city, which some people do, dilutes the benefits of a tax.

Among the cities that banned the adoption of new soda taxes are Arizona, California, Michigan, and Washington. The papers' findings suggest that these bans are not economically justified.

The conclusion of the researchers on the societal benefits of soda taxes are based on the following:

Just like the emission from cars pollution that harms others, sugary drinks are connected to diabetes, obesity, and heart disease, resulting in medical bills ultimately paid by taxpayers through Medicare and Medicaid, or by private insurers. The researchers estimate that, on average, drinking a 12-ounce can of Coke will impose about 10 cents of health care costs on others.

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