What is Cost of Equity? – Meaning, Concept and Formula
February 12, 2025
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Sugary beverages manufactured by companies such as Coca-Cola and Pepsi are colloquially called “soda” in the United States.
Americans consume soda in large quantities. This consumption can be attributed to the fact that soda is easily and cheaply available. The low cost and easy availability are considered to be one of the main reasons why Americans have high rates of obesity and lifestyle diseases such as hypertension, diabetes and even cancer.
The link between high consumption of soda and the increase in health care costs is direct and has been reported by several investigative agencies. It is for this reason that some provinces in America have started levying a soda tax.
In simple words, a soda tax is only levied on beverages which have more than a certain specified content of sugar. California was the first state to levy a soda tax in America. However, Philadelphia has one of the steepest rates of this tax.
On the global front, many countries like Denmark, Barbados and the United Kingdom have successfully applied soda taxes. America is amongst the new entrant in the club.
Since soda companies such as Coca-Cola and Pepsi are based in the United States, there is a lot of lobbying which is being done in order to repeal these taxes. This has led to a debate breaking out in the United States upon the advantages and disadvantages of a soda tax. In this article, we will have a closer look at these advantages and disadvantages.
The advantages of the soda tax have been listed below.
In many developed countries, the government has to bear the health care costs. Hence, more unhealthy people mean that the government has to face more expenses.
By levying soda tax, the government ensures that there will be fewer expenses in the future. Hence, it makes financial sense to levy such a tax.
Hence, the governments in these nations and provinces have been able to successfully alter corporate behavior with economic incentives. Companies have become more socially responsible thanks to the soda tax.
The soda companies have been lobbying hard to get the soda taxes repealed. They have been stating many disadvantages of these taxes. Some of the most prominent ones are listed below.
These companies have been alleging that by forcing customers to choose certain kinds of products over others, the government is infringing on their constitutional rights.
The consumption is still continuing, and the damage to health is still being done. However, by implementing the soda tax, the state is just reducing its own revenues and that of the local businesses. They believe that there are no winners as a result of this tax. However, there are significant losses that local businesses have to bear.
The soda companies, therefore, state that alcohol prices should also be raised further by taxation. If that is not possible, then the soda taxes should also be repealed.
Hence the allegation that the soda tax is actually a regressive tax which takes from the poor and gives to the rich. However, the government has refuted this allegation saying that their objective behind levying these taxes is to ensure that the consumption of soda amongst lower income groups is drastically reduced.
To sum it up, many governments all over the world have woken up to the ill effects of consuming sugary drinks. The soda companies are likely to see more action being taken to prevent excessive consumption of sugar.
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