Market Failure of Sugar Sweatened Beverages

Topics: Externality, Supply and demand, Economics Pages: 4 (1290 words) Published: March 11, 2013
Vt. House panel advances penny-an-ounce soda tax

MONTPELIER, Vt. (AP) — A Vermont House committee voted Wednesday to advance legislation calling for a penny-an-ounce tax on sugar-sweetened beverages. The House Health Care Committee voted 7-2, with two members absent, for the tax bill that would raise an estimated $27 million to support state health programs. Supporters say it will also discourage consumption of products that are big contributors to obesity. "We have an obesity epidemic and the scientific data is clear that sugar-sweetened beverages have a unique place in contributing to this epidemic," said Rep. George Till, D-Jericho, a doctor and member of the Health Care Committee. He said reliable studies have shown the tax would "substantially reduce the average 44 gallons a year of sugar-sweetened beverages we drink in Vermont." The measure faces an uncertain future. Gov. Peter Shumlin has gone on record opposing the tax, saying it would send shoppers to neighboring states. That argument is being pushed hard by retailers and a beverage industry group that has been buying full-page newspaper ads and has launched a full-court press lobbying effort to block the tax. "We don't believe we should be singled out as an industry and a heavy tax placed on our products," said David LaRose, a manager with the Coca-Cola Bottling Co. of Northern New England. He said the beverage industry already has been taking steps to reduce the beverages' role in increasing obesity, pulling high-sugar drinks from schools, offering a broader range of low- and no-sugar products and promoting school athletic programs. The tax would be levied on distributors, rather than paid on retail sales like a sales tax. LaRose said companies would respond by spreading the cost of the tax across their full range of products, so any price signal that might prompt a consumer to choose bottled water over a Coke would be lost. The House Health Care and Ways and Means committees have been hearing from...
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