Sin Taxes Work, But Should We Use Them?
Ester Bloom
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Unfortunately, an excise on soda is wrongheaded because consumption of soda does not create negative externalities. Even excessive consumption of soda does not create negative externalities if you’re covered by private health insurance or able to pay for your own medical care. It only creates a negative externality when the consequences of your actions requires public intervention.

Direct taxes on certain goods and activities are the most effective way of transferring the costs of negative externalities back to the originator, but the complexity of any individual’s diet and its potential effects on health make it impossible to impose a direct tax on certain foods and drinks in order to redirect the cost of negative externalities.

Unfortunately, this is not the kind of thing that can be easily explained to the average citizen, which makes it all the more dismaying that garden variety politicking created such wrongheaded public policy.

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