Monday, July 4, 2011

Do taxes on (non-diet) soda decrease investment in diet soda?

Hank Cardello, a former executive at Coca-cola, writes in the Atlantic that we should:

Keep taxes low to promote product R&D. Proposals such as soda or "fat" taxes only serve to raise revenues for government treasuries and have not been proven to lower obesity rates. Higher taxes reduce revenues and steal dollars earmarked for developing lower-calorie, better-for-you products that meet emerging consumer demands.
He worked at Coca-cola so maybe we should take his word that Coke will invest less in alternatives to sugary sodas when the taxes kick-in, but it sounds counter-intuitive. If soda becomes more expensive people will substitute other goods, increasing demand for alternatives. That increases the incentive to development tasty low- and zero-calorie beverages.

The fact that he links to study that found the taxes are effective--if you click the link it quotes the author saying "[a]ny strategy that shows even modest weight loss should be considered"--also makes me wonder if he has any idea what he's talking about.

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