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Study: Beverage tax would grab millions from the poor, do nothing to stop obesity

One of the more unusual solutions to the state‚??s budget crisis is a proposed 2-cents-per-ounce tax on sugary drinks.

This article originally appeared on watchdog.org.

As lawmakers in Vermont consider¬†a tax to help end¬†obesity, a study by¬†economists at George Mason University¬†finds raising¬†taxes on ‚??unhealthy‚?Ě foods hurts the poor financially¬†and does nothing to lower consumption.

As the midsession break comes to and end, all eyes are focused on the ever-growing hole in the Vermont state budget, which has reached $130 million.

One of the more unusual¬†solutions to the state‚??s budget crisis is a proposed 2-cents-per-ounce tax on sugary drinks.

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Sponsored by state Rep. Alison Clarkson, D-Woodstock, H.235 aims to raise about $34 million by taxing beverages like soda, fruit juice, teas and sports drinks.

While the tax would help fund¬†Vermont‚??s obese budget, the bill claims to be a solution to the growing¬†obesity crisis.

Clarkson‚??s legislation¬†reads like a warning from the World Health Organization:

Vermont is facing a serious public health crisis as the incidence of preventable illnesses related to obesity, such as Type II diabetes, heart disease, and many forms of cancer rise with overall rates of obesity in Vermont‚??s population. ‚?¶ There is overwhelming scientific evidence that consumption of sugar-sweetened beverages is directly linked to the incidence of obesity, obesity-related diseases, and dental caries.

The proposed legislative fix¬†is to give the state two pennies for every single ounce of ‚??sugar sweetened‚?Ě liquid distributed to¬†stores.

But a new study finds that sin taxes like those proposed in H235 take money from the poor while doing nothing to curb consumption.

The Mercatus Center¬†study, ‚??Regressive Effects: Causes and Consequences of Selective Consumption Taxation,‚?Ě examines the¬†impact of price hikes on sin-taxed food products.

Of the 12 items examined in the study¬†‚?? soda, alcohol, cookies, donuts,¬†chips, and the like¬†¬†‚?? none saw a significant change in consumption based on¬†adjustments to¬†consumers‚?? purchasing power.

While alcohol purchases¬†correlated slightly with greater or lesser consumer purchasing power, purchases of sugary items and ‚??junk food‚?Ě remained steady.

Moreover, the economists conclude that sin taxes are regressive in nature, since low-income Americans consume these foods and beverages at disproportionate levels.

‚??Because the types of goods targeted by these taxes have relatively inelastic demand ‚?? meaning consumers will keep purchasing them regardless of increases in price ‚?? the taxes are regressive in nature,‚?Ě researchers wrote in the report summary.

The authors expressed concern that consumption-oriented taxes would increase the plight of the poor.

‚??Individuals who continue to purchase ‚??unhealthy‚?? items after a tax has been levied or raised will see a decline in their disposable income ‚?? the money they have available for spending on other goods ‚?? making it more difficult for them to climb out of poverty,‚?Ě the researchers added.

According to the report, educating the public and offering healthy alternatives would be more effective, moral options for addressing obesity.

Contact Bruce Parker at bparker@watchdog.org

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