Last week, New York Gov. David Paterson dropped his proposal to tax sugary drinks by a penny per ounce, and The New York Times has an analysis on how the money behind the soda industry and the power of anti-tax advocates did it in. Pepsi Co., which has a headquarters in Westchester County, and Coca-Cola, which has a bottle-distributing plant on Staten Island, surely played a role, but it probably doesn't help that progressives weren't fully behind it either.
That's partly because the tax, like all sales taxes, was regressive, but it's worth remembering that only matters if lower-income families don't shift their spending at all. The evidence is that demand for soda is highly elastic, which means that, when push comes to shove, families can do without sugar drinks if they cost too much. The budget would have had revenue raised from the tax go to the Department of Health, which pays for the health care of lower-income families. So a tax gathered from everyone would have gone to help subsidize health care for the poor.
A corollary, of course, is that reducing the amount of soda that everyone drinks might not have necessarily decreased rates of obesity, even though a large amount of excess calories in the American diet come from sugary beverages which do nothing to decrease hunger. But that doesn't mean we still shouldn't work to reduce their consumption and exploit a new opportunity to raise revenues. Taxes can be good, but it's a hard message to sell.
-- Monica Potts
