Policy makers and the public have become increasingly concerned about the dramatic growth in obesity that has taken place in the United States over the last several decades. While the public claims to be concerned about the issue, obesity rates continue to increase. People seem content to wait for a magic pill that will correct the problem. While science has so far failed in its attempts to invent that pill, policy makers think they have found it. It's called excise taxes.

Most economists, particularly those in public finance, find it preferable to raise revenue by taxing a broad base at a low rate in order to maximize the amount of revenue while reducing the distortions to the economy.  The opposite of a broad-based tax is an excise tax, a tax levied on particular goods. Historically, governments have used soft drink excise taxes, which have existed since at least 1920, primarily to generate revenue. Today, however, states and localities increasingly view the taxation of soft drinks as a social tool—a way to curb rising obesity rates.

Policy makers and the public have become increasingly concerned about the dramatic growth in obesity that has taken place in the United States over the last several decades.  Policies that tax sweetened soft drink for the purposes of reducing obesity and, in some cases, raising funds to advance this goal seek the same economic legitimacy as past attempts to tax “sin products” like tobacco, alcohol, and firearms.  Not surprisingly, though, this tax raises efficiency concerns similar to those taxes. Taxes on sweetened soft drinks do not necessarily advance the overall public interest, may be regressive in nature, and hardly ever work as intended.