⌛ Sugar Tax Argument Analysis

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Besides being depicted as a way to improve public health, soda taxes are also now being looked at as a way to shore up state and local budgets and expand important services such as education. Although it might be more politically expedient to tax a demonized product like soda to pay for popular services, this represents bad fiscal policy. Ideally, public services should be funded by taxes with a broad base and low rate. Soda taxes are the opposite, subjecting a narrow tax base to very high tax rates. Policymakers should also be aware that soda consumption has already been steadily declining. Enacting a tax on a product with this consumption pattern might result in a temporary spike in revenue, but will soon be followed by a revenue decline as consumers continue shifting their spending habits.

Retailers, distributors, and restaurants are all bound to be affected, either through smaller profit margins or reduced sales. One beverage company, Pepsi, announced layoffs related to the Philadelphia tax. The Tax Foundation works hard to provide insightful tax policy analysis. Our work depends on support from members of the public like you. Would you consider contributing to our work? We work hard to make our analysis as useful as possible. Would you consider telling us more about how we can do better?

A regressive tax is one where the average tax burden decreases with income. Low-income taxpayers pay a disproportionate share of the tax burden, while middle- and high-income taxpayers shoulder a relatively small tax burden. The tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority.

A narrow tax base is non-neutral and inefficient.