Articles in the New England Journal of Medicine on April 30, and in the New York Times on May 19, discuss a proposal now before Congress to impose a tax on sugar-sweetened sodas in order to reduce obesity. Taxes are ordinarily intended to raise revenue, but some taxes, such as taxes on alcohol and tobacco--and on carbon emissions, should such a tax ever be passed--are designed not to raise revenue but to alter behavior, and the more they succeed in altering behavior the less revenue they generate.
Sugar-sweetened sodas are high in calories, are drunk in great quantity, and because they have little nutritional value don't substitute for other foods; they are a net addition to caloric intake. The NEJM article estimates that consumption of such sodas adds an average of 125 to 150 calories per day to the average American's diet, and cites studies that estimate that the elasticity of demand for such products is about -1, so that a 10 percent soda tax tax could be expected to reduce consumption by about 10 percent, with the result, according to the author of reducing the average person's weight by about 2 pounds a year.
I am skeptical, because the author ignores the possibility of substituting untaxed sugar-sweetened foods or beverages. People who crave sugar will find no dearth of substitutes for sugar-sweetened sodas. Moreover, most consumers of these sodas are not and never will be obese. They may well be overweight, but all that that means is that they are heavier than the "ideal" weight calculated by physicians; if they are only slightly or even moderately heavier, the consequences for health or social or professional success are apparently slight.
To the extent that a soda tax would cause substitution of equally sugared foods, it would not only have no effect on obesity; it would yield no revenue--a material consideration because supporters of the tax hope, albeit inconsistently, that it will both reduce obesity significantly and contribute significantly to financing the Administration's ambitious and very costly program of health-care reform.
There are many obese Americans, in the sense of ones who are grossly overweight (with some being morbidly obese), and we should consider whether society should be concerned with obesity if not with mere overweight. Obesity impairs health, and, in most segments of the population it diminishes social and professional success as well, and so it can be regarded as self-destructive behavior. Some of it is involuntary--there are people whose genes make it virtually impossible for them to avoid becoming obese--but most obesity could be avoided by careful diet and exercise. The obese are people who by dietary choice and preference for a sedentary style of life have traded off the costs of obesity against the costs of being thin and have decided (at least in a "revealed preference" sense--they may not have consciously chosen a style of life that predisposes them to obesity) that the costs of thinness preponderate over the benefits. And in general we do not try to prevent people from making such tradeoffs.
But there are two situations in which preventing people from choosing the style of life that maximizes their utility can be defended (provided certain assumptions are made about cost and efficacy) on economic grounds. One is where consumers are unable to evaluate a product or to act upon their evaluation; another is where a voluntary transaction imposes costs on other people which the transactors do not take into account.
The first is a significant factor in the soda market. The sellers advertise very heavily to children, who do not have the knowledge or the self-control that they would need to be able to resist such advertising. In well-ordered households, the parents regulate children's access to television and the Internet and know they should limit the children's consumption of sugar-flavored drinks and do limit it. But in many modern American households, especially but not only those in which there is only one parent, children's access to soda and soda advertising is not restricted.
The solution, though, is not a tax on sodas, as such a tax would have only a small effect. A ban on advertising would be preferable; it would probably impose only slight costs on adult consumers of such drinks, because the advertising of such drinks contains little information. It is true that such a ban would reduce new entry into the soda market and that this might lead to higher prices, but if so that would reinforce the effect on sales of the ban on advertising.
As to whether by increasing obesity the sale of sugar-flavored sodas imposes costs on other people besides the buyers, the evidence is mixed. Obese people have more health problems than the non-obese and hence higher annual medical costs; they also lose more time at work because of illness. Their poorer health increases the medical costs of other people in their insurance pools and reduces the productivity of their employers, assuming realistically that employers cannot selectively reduce the wages or health benefits of their obese employees. Cutting the other way, obese people have a reduced life expectancy, and the shorter a person's life, the less an above-average annual cost of medical care translates into an above-average total (lifetime) cost. But assuming nevertheless that the net social costs of obesity are positive, this would be a ground for arguing for taxing obesity, but such a tax would be unacceptable as well as cruel. The alternative of a soda tax would be unlikely to have much effect, for the reasons stated earlier.
Are there better ways of fighting obesity, assuming it is worth fighting? Probably not. Education would probably have very little effect, because almost all people know that being fat has bad consequences and that eating foods rich in sugar and butter and not exercising increase the likelihood of becoming obese. Obesity is concentrated in the lower middle class, which contains a high proportion of people who have very high discount rates, which prevents them from giving significant weight to the future consequences of present behavior.
Children may be ignorant about the costs of obesity and the effects on it of sugar, but because of lack of self-control and children's inability to imagine themselves as middle-aged adults, I doubt that trying to educate them in the dangers of drinking sugar-sweetened beverages would be effective.
A tax on calories, or on high-calorie foods or ingredients, would be difficult to design and administer and would impose welfare losses, without significant offsetting wealth gains, on thin people. A further problem is that fattening foods, including sugar-flavored sodas, have fallen in price over time relative to fruits and vegetables and other healthful foods, so that a tax on calories would be highly regressive.
A modest measure would be to bar the sale or other provision of sugar-flavored sodas and other fattening foods in schools, and the substitution of nutritious low-calorie school lunches for the present fare. In addition, more school time could be allotted to physical education, which in recent years has diminished in most schools. The cost of these measures would be modest and they would have some effect in reducing obesity.