Question

According to studies undertaken by the US Department of Agriculture, the price elasticity of demand for cigarettes is between – 0.3 and – 0.4 and the income elasticity is about + 0.5. Suppose Congress, influenced by studies linking cigarette smoking to cancer, plans to raise the excise tax on cigarettes so the price rises by 10%. Estimate the effect that the price increase will have on cigarette consumption and consumer spending on cigarettes (in percentage terms).

A few states and cities across the United States have imposed a soda tax or a sugar tax on soft drinks, to reduce overall sugar consumption. In most forms, the tax is designed to discourage the production, importation, and purchase of carbonated, uncarbonated, sports and energy drinks with excess levels of added sugar. This kind of tax is a matter of public debate and often strongly opposed by food and beverage producers. Advocates promote this tax as an incentive to cut down on unhealthy diets and offset the growing economic costs of obesity. Do you support a sugar or soda tax? If so, why? If not, why not? Please discuss in detail by showing solid economic reasons to support your view.

Answer 1

Sugar Tax or Soda Tax is a bad idea because,

Sugar taxes are not very good at making people live healthier lives. People will still try to get their calorie kick some other way. For example, when a sugar tax was introduced in Mexico, it led to people eating more chocolate and sweets.

The sugar tax is also regressive - hitting the already hard up the hardest. Placing a levy on everyday products almost always take a greater share of income from poorer households than better off ones. The sugar tax is doubly regressive as low-income households tend to drink more sugary drinks than richer ones.

The planning system, fuel duty, income tax, air passenger duty, and duties levied on alcohol and cigarettes, the sugar tax is just another way in which the government makes life more expensive for the poorest people in the country.

Also that, the sugar tax would increase cost of production and in turn increase the price of the products.

To cut down on cost, companies may reduce its employs and thereby leading to unemployment.

People should be free to decide what they eat and drink. It is nobody else’s business. The sugar tax represents an unacceptable infringement on personal liberty and freedom of choice.