Are Soda Taxes for Raising Revenue or Lowering Weight?

People don't like being told what to do. Tell Miami folks they can't buy detergents containing phosphates, and they'll stockpile detergents containing phosphates. Try telling kids not to write on a wall, and they'll wait until your back is turned as right on the wall. Sheena Iyengar ties this principle, known in the psychological community as reactance, to the soda tax debate.

While it seems unlikely that a cent-per-ounce tax on sugary beverages would instigate a spell of carbonated disobedience, I think her kicker is good advice:

If we want to implement a sweetened beverage tax and maximize its effectiveness, the best approach would be to dissociate it from the larger issue of individual choice and focus on its immediate practical benefits, such as the revenue it produces. Over time, we'll get used to it.

The revenue rationale is key. Although sugared beverages are one of the top sources of calories in American diets, it's not clear that marginally discouraging their consumption will reverse the effects of obesity. As part of a larger federal food strategy of eliminating corn subsidies, applying food taxes and closing the price gap between fresh grapes and grape soda, it could perhaps reduce the factors that contribute to childhood obesity and nip our weight-gain epidemic in the bud.

In the short term, it is clear that state budgets are suffering under the weight of unfunded spending, and a few extra cents for every 12-oz bottle of sugary goodness might help states raise crucial revenue. Most taxes target positive activities: earning income, making successful investments, selling goods. Pigouvian taxes, like ones on sugar drinks, have the added benefit of discouraging something folks consider harmful or over-consumed. The nice thing about Pegouvian taxes is that even if consumers exhibit reactance by, say, drinking a lot more soda, that simply means the government makes more money.

In the short-run, soda taxes could shrink deficits, save public sector jobs and maybe, just maybe, keep our kids in smaller clothes. In the long term, as state budgets recover, we could even use them to offset tax cuts on state income and retail levies.