Not So Sweet Regulations

On election day in Berkeley, California, along with electing politicians Berkeley also passed the first tax on soda and soft drinks. The premise of the tax is that soft drinks contain sugar which causes obesity, therefore by taxing soft drinks it will decrease the amount of sugar consumed and decrease obesity. Therefore, taxing soft drinks is in the public interest! I have a lot of problems with the logic behind this argument, but let's assume that it's correct. When talking about the theory of regulation in class, we said that for almost any regulation implemented we could make an argument for public interest and that most regulations are economically rational for someone. If we ignore the public interest argument, who could benefit from this regulation?

The tax is on the soft drink producers, but they will likely try to pass this cost on to the consumers. The overall effect will likely be similar to a price increase, which will decrease the amount consumed. The benefits of such a policy will likely go to the substitute goods, which are any drinks with no added sugar. Organic juices, water flavorings, and naturally sweetened soft drinks all will not be taxed, and may benefit from the soft drink tax.

Surprising from an economic standpoint is the fact that many doctors supported this tax. If soft drinks increase obesity, and obesity causes health problems, then economically doctors should be opposed to the tax. Less obesity leads to healthier people which in turn leads to fewer doctor visits resulting in less profit for the doctors. So perhaps not everyone who supports regulations looks at the regulations from an economically rational point of view.