Make someone pay more for something, and perhaps they will complain and buy less of it. Such is the reasoning behind “sin taxes” like a tax on soda, to try to curb the wave of obesity in the U.S. But should those taxes be imposed on consumers, or rather, on the manufacturers making the soda?
Time’s Jeffrey Kluger is making the case that levying a tax on soda and sugary drinks that has customers shelling out more money isn’t the way to go. He cites a study in the journal Contemporary Economic Policy that says you can get that same sweetness you get in a high-calorie soda in a lot of different ways. Imposing a tax on manufacturers that pushes them to reformulate their drinks using healthier recipes is more effective than taxing consumers.
One of the economists behind the study explains it thusly: “What you’re trying to do is apply the tax as close as possible to the thing you’re trying to change.” In this case, that is the recipe, not trying to control what choices the shopper makes.
So if manufacturers have to adjust their formulas and perhaps pay more for a healthier recipe, won’t they pass that charge on to customers? Yes, probably, but only in the amount of a few pennies, instead of lots and lots of pennies.