Berkeley’s soda tax boondoggle enriches city, does not reduce obesity

It is undoubtedly not healthy to drink sugar and fructose corn syrup-laden soft drinks.

Instead of allowing people to make their own health decisions, however, increasingly government is stepping in to make those decisions for them, usually through taxation.

In California last November, 75% of the votes cast on Measure D in Berkeley were in favor of taxing soft drinks at the rate of one cent per ounce. For a liter bottle of soda, the tax amounts to nearly 34 cents.

Granted, this is not a large amount of money. However, it speaks volumes about the attitude of people who believe government has the right to tax the consumption habits of citizens.

Advocates framed the taxation vote as a battle between “communities of color and their kids” and “Big Soda.”

“The community in Berkeley took on Big Soda and prevailed, against all odds. The American Beverage Association poured over $2.4 million dollars into our city and expected to crush the effort like they had so many others. But our community coalition held firm and fought back with the power of relationships: grassroots organizing, volunteers, and thousands of conversations between neighbors, parents, and friends. This victory belongs to all of us,” proclaims the Berkeley Healthy Child Coalition, an organization supported by the NAACP, Latinos Unidos, and the Berkeley Federation of Teachers.

It’s also a big win for government.

The tax generated $116,000 in revenue in the first month of its operation, according to Councilman Laurie Capitelli. The windfall was pumped into Berkeley’s General Fund.

The city did not meet its goal of reducing consumption, however.

“In light of the predictions of the proponents of the tax, as well as in light of the previous research, we expected to see the tax fully passed through to consumers,” said John Cawley, professor of policy analysis and management and of economics in Cornell’s College of Human Ecology. “In contrast, we find that less than half, and in some cases, only a quarter of it is. This is important because the point of the tax was to make sugar-sweetened beverages more expensive so consumers would buy, and drink, less of them.”

Instead of buying soda in Berkeley, many consumers may decide to go elsewhere to avoid the tax and in the process endanger business in the city.

“The reason for this surprising result could be related to the fact that it’s a city tax and therefore store owners have to be concerned about the ability of consumers to shop at stores outside of Berkeley,” Cawley added. “Concerns about cross-border shopping could contribute to a low pass-through of the tax.”

Despite the failure to reach its goal, advocates celebrated.

“We believed that we would succeed, and we delivered. And most importantly, we delivered for the children of Berkeley,” said Councilwoman Lindo Maio, who obviously believes government has the right to make decisions for children, instead of their parents.

Children and their families will fight obesity despite the effort, according to Cawley.

“There is an economic rationale for taxes when consumption of the good imposes negative externalities, and obesity costs taxpayers billions each year in medical care costs in the U.S.,” Cawley said. “A sugar-sweetened beverage tax is a very narrow approach to internalizing the external costs of obesity, because there are many other food and drink items that are also energy dense and lack nutritional value. But to the extent such a tax helps internalize the external costs, there is an economic rationale for it.”

If that were the case, the money would be used for nutrition, healthy eating programs and medical costs associated with obesity.

Instead, the tax money will continue to be deposited in the city’s general coffer.

Sources:

Berkeley Healthy Child Coalition

Cornell Chronicle