It’s been two and a half years since Philadelphia became the first large American city to charge a soda tax. The tax rate of 1.5 cents per ounce—30 cents on a 20-ounce bottle or $1 on a 2-liter bottle—was designed to improve health outcomes by lowering consumption of sugary drinks. The tax has raised $200 million in revenue earmarked for pre-K education and other city programs, but the policy has met with strong resistance by soda manufacturers, grocery store owners and restaurateurs who say the tax has hurt their businesses.
In a recent study, a team of economists analyzed the results of the so-called sin tax on soda to determine the optimal rate. The paper, “Regressive Sin Taxes, with an Application to the Optimal Soda Tax,” is co-authored by Benjamin Lockwood, a Wharton professor of business economics and public policy.
“Fundamentally, people like doing things that are sometimes not great for them, and we want to take that into account,” says Lockwood. “There’s also some concern that these kinds of taxes can be regressive because poorer consumers often buy soda at higher rates. We wanted to take all of these different things into account and figure out, on net, are these taxes beneficial for society or are they harming society?”
Read more at Knowledge@Wharton.
