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September 12, 2012

Slate: Don't ban Big Gulps

(Continued)

Still, it's a leap to go from an analysis of whole-milk consumption to an endorsement of taxation as a tool for social engineering. A stereotypical image of a milk shopper is a mom_possibly a price-conscious one_stocking up for her family; supermarket soda purchases may have a different set of customers or even invoke a different set of responses from a given shopper. (Milk is a staple, for example, and soda an indulgence.)

A pricing experiment run at a hospital cafeteria in Boston in 2008 provides at least some indication that soda taxes may also help change drinking habits, though taken at face value its results suggest that taxation may have to be aggressive to wean soda drinkers from their beverage of choice. A team of public health researchers convinced the hospital administration to allow them to raise the price of a 20-ounce regular soda by about a third (from $1.30 to $1.75). In the weeks that followed, regular soda consumption dropped by about 26 percent, and was accompanied by a nearly offsetting increase (20 percent) in diet soda consumption. (Unlike the milk study, however, it's worth noting that the subjects of this study_cafeteria patrons at the Harvard-affiliated hospital_may not be representative of the average American.)

Taken together, these findings should make some adversaries of sin taxes at least reconsider their opposition. During his time as New York state governor, David Paterson proposed a sugar tax on the same beverages that Bloomberg hopes to ban in their 32-ounce form. The plan (supported by Bloomberg) was a nonstarter in large part because of fears of the impact on low-income soda addicts who would keep buying regular soda rather than the untaxed diet version. The findings of Khan et al. suggest that the income effects would be limited if a sugar tax creates even a modest price difference between regular and diet soda: Poor consumers will switch drinks rather than continuing to buy soda they can't afford. While 15 percent might sound like a lot of sticker shock, society has come to terms with cigarette taxes that, in New York City, constitute over a third of the price per pack.

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