This entire process certainly didn’t start with Michael Bloomberg, but he definitely made it famous. The subject at hand is the increasing popularity of soda taxes (or more broadly, “sugary drink” taxes) as the latest sin tax of choice among liberals. It’s been attempted in various places, but one of the more recent ones was enacted in 2015 in the liberal bastion of Berkeley, California. Since going into effect there have definitely been some impacts on the local economy and this piece from Time Magazine attempts to pick out some sweet spots in the data (if you’ll pardon the pun) as proof that the system is “working.” Let’s see what they came up with.
The researchers looked at whether the tax impacted the buying behaviors of Berkeley residents. They found that one year after the tax took effect, sales of sugar-sweetened drinks fell by close to 10%, and sales of water increased in Berkeley by about 16%. Sales of unsweetened teas, milk and fruit juices also went up, suggesting people were substituting their sugary drinks with healthier alternatives…
The findings suggest that even in higher-income communities, a soda tax can impact sales. Popkin predicts that the drops would be even greater in cities and counties with lower-income communities. In Mexico, which passed a similar tax that took effect in 2014, there have been significant declines in the consumption of sugary beverages. Among low-income residents, it dropped by 17% early on.
So since the tax was enacted, sales of all sugar sweetened drinks fell by 10% in the area where the tax was collected. I suppose if we bring the conversation to a dead stop right there you might be led to believe that the effort was effective, eh? But as with so many other metrics in society, the raw numbers don’t speak to a host of other factors. Here’s one thought… Berkeley is a very liberal spot with lots of vegans and other “health conscious lifestyle” types of folks. Do you suppose that people were just looking for healthier options anyway? The study doesn’t tell us if this was a sudden reversal or part of a longer trend.
Here’s another factor to consider. When you drive up the price of any goods or services, it’s true that some people will choose not to spend their money in that fashion. But others may seek a cheaper option. Here’s where the report goes completely off the tracks. (Emphasis added)
Another interesting finding in the study was that sales of sugar-sweetened beverages in neighboring cities rose nearly 7%—possibly because people may be buying their soda where it’s cheaper. Yet Popkin says he’s skeptical that the number of people in Berkeley would be great enough to increase the rates of other cities substantially, and believes that the higher rates could be partially unrelated.
So you were willing to flatly accept a 10% drop as being attributable to the tax, but you’re “skeptical” that the 7% rise next door could be caused by people buying in bulk where the product is cheaper? Yeah… that makes total sense.
Far more likely is that the real drivers for these changers are, to some significant degree, attributable to normal market forces. When you drive up the cost of something people look for other options. That happened in Philadelphia where the city government decided to save the people from themselves with a similar soda tax. The net result seemed to be angry consumers, more people shopping in the nearby county without the tax and, just by the way, the local Pepsi plant laying off a bunch of their workers. Brilliant!
None of this, of course, addresses the underlying problem with this approach. Since when is it the government’s job to engage in social engineering experiments using the power of taxation as a cudgel to wield against the citizens? If you honestly believe that soda is a dangerous product unfit for human consumption, then ban it. If the people support your efforts you will be reelected. But if it’s good enough to be legally sold, then don’t pretend you’re trying to make people healthier by letting them drink something that you are saying is borderline toxic while actually just filling the city government’s coffers with their grocery money. That’s both dishonest and insulting.