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Essay On Tax Policy Memo

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Soda Tax Policy Memorandum
More than 35% of American adults are obese and as a consequence, are at increased risks for health issues such as heart disease, high blood pressure, and diabetes ("Overweight & Obesity"). The U.S. taxpayer is supplementing much of the cost to treat obesity related health issues through public health programs such as Medicare and Medicaid ("Economic Costs"). A positive externality will occur in the form of decreased health care expenditures on Medicare and Medicaid. The U.S. government should impose an excise tax on soda and other beverages that contain sugar. Consumers who drink excess sugary beverages impose a negative internality on their health; as well as imposing a negative externality on the American …show more content…

The levels of sugar contained beverage consumption is still high, and a public health cost hike is expected to treat obesity related illnesses. Costs for Medicare and Medicaid are expected to balloon to an estimated $550 billion in upcoming decades ("Obesity and Severe Obesity Forecasts Through 2030").
By imposing a sugar beverage tax, consumers will demand less of the good and drive demand downward. Similarly, the sugary beverage market is elastic to price changes ("Price elasticity of the demand for sugar sweetened beverages and soft drinks in Mexico"). If the prices of sugar beverages increase, the demand will decrease ("Price elasticity of the demand for sugar sweetened beverages and soft drinks in Mexico"). However, a counterclaim does arise which argues that even if consumers of these beverages decide to stop purchasing a taxed good, they will purchase substitute goods that have the same satisfactory effect at a price that isn't affected by the tax. This idea was presented by Jason Fletcher from the University of Wisconsin. In his published research, Fletcher found that BMI remained constant or increased even when consumers are confronted with a beverage tax (Fletcher, Frisvold & Tefft 2009).
While Fletcher's argument holds merit, the study does acknowledge the weight loss contributing to a tax, even though they considered it a minuscule one (Fletcher, Frisvold & Tefft 2009). The fact is that sugary beverages are elastic goods that do

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