Sugar and Spice and Everything Nice

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As America begins the health care reform debate, there are plenty of ideas on the table: universal coverage, freedom to choose health care providers, and improved quality of care. And who wouldn’t want all of this?
 
Well folks, what we need to figure out is how we’re going to pay for all of these nice things. Here’s an idea that’s been gaining some traction: tax beverages with high sugar content, a.k.a. the soda tax.
 
Taxing things that taste good goes back to at least the 15th Century, during the days of the spice trade. When the Ottoman Empire took over Constantinople in 1453, they also took control of the sole spice trade route; they charged hefty taxes on spices that passed through.
 
The tax stimulated the race between the Portuguese, Spanish, English, and others to find the fastest alternative route and establish another dominant force in the spice trade. Oh, and it also led to the discovery of America.
 
When we examine rising health care costs, we find a strong correlation between increased consumption of calories and chronic preventable diseases (i.e. diabetes and heart disease). And this helps proliferate both health care utilization and costs.
 
So taxing high-sugar beverages has its merits. Consider this: the average American consumer drinks 190 calories of sugary drinks a day now, compared to 70 calories a day in the 1970s.
 
Will the tax be effective? Yes! Studies shows that soda drinkers are price sensitive. Historically, a 10 percent increase in soda prices has led to an 8 percent decrease in soda consumption.
 
Soda companies are clearly against such a tax, which will negatively impact their bottom line. But just like the spice traders in the 15th Century, innovation will prevail and new routes to profitability will be discovered. Now this is something nice!