Thursday, December 18, 2008

New York's Soft Drink Tax; Calorie Posting; and Economic Externalities of Super-Size Sodas

After eight years of neglecting public policy at the federal level, states and counties have taken it upon themselves to fill the void left by Bush appointees.

Counties, cities and states have banned trans fats, mandated calories be posted on menu boards, used zoning to control the rampant growth in fast food outlets, and now Governor Paterson's (D-NY) newest policy move is a tax on sugared soft drinks. With this move, Paterson accomplishes several goals. One, he adds tax revenue to New York's desperate financial problems. Two, he tackles obesity where it flourishes -- with calorie laden non-nutritious liquid candy, aka soda. And three, he fires a salvo at powerful industry groups like convenience store associations, restaurant associations, beverage lobbies, etc. who oppose any action designed to point out the evils of their products.

In economics, there is a concept called externalities. What an externality basically is is a cost not reflected in the product itself, but one that is paid for and absorbed by society at large. For example, the price of a gallon of gasoline does not cover the costs of the pollution it creates. The price of a car does not include the price of public highway construction needed for cars to drive on.

In the foodsphere, the price of a sugared soft drink does not include the medical costs of obesity, diabetes, heart disease and all of the medical ailments stemming from obesity. Now I'm not naive enough to think that the soft drink tax will go anywhere other than to the general revenue of New York State, but somewhere, somehow, I'd like to think that the extra revenue to the state paid by those who drink themselves obese would be used to cover some of the health care costs borne by the state in caring for its citizens.

Is it really necessary to have 64 ounce sodas sold at gas stations and convenience stores? Have you ever seen the size of the large sodas sold at the movie chains? Taxing them is sound public policy. It is also sound public policy to require the convenience stores and movie theater to post the calories contained in those giant sodas so that consumers can see number of empty calories they would ingest and make informed decisions to reject those products.

Also, I've really been enjoying Marion Nestle's coverage of Governor Paterson's proposed soda tax.

All valuable food for thought.