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Essay On Tax Policy Memo

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Soda Tax Policy Memorandum
This policy memo will address why the policy maker should impose a sugar beverage excise tax on the American Beverage Association's member corporations. 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. …show more content…

Costs for Medicare and Medicaid are expected to total to an estimated $550 billion dollars 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 the market downward. Similarly, sugar 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 sugary beverages decide to stop purchasing from a taxed good; they will purchase substitute goods that have the same satisfaction effect at a price that isn't affected by the tax. This idea was presented by Jason Fletcher from the University of Wisconsin, in research he published, he found that BMI remained constant or even increased due to a sugar beverage tax (Fletcher, Frisvold & Tefft 2009).
While this 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). From the constituted fact that sugary beverages are elastic goods that do cause consumers to react to price changes. According to research conducted by

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