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These 4 Cities Just Raised Taxes on Soda. Will It Matter?

You're going to pay through the nose to drink soda in five cities after voters approved ballot measures imposing new taxes on the sweet drinks. Image source: Getty Images.

It wasn't just votes for Donald Trump or Hillary Clinton that were cast on Election Day. In a handful of municipalities, people were also deciding whether they should impose a tax on sugary beverages. The measures passed in all of them.

Cost of consumption

According to the World Health Organization, there is "reasonable and increasing evidence that appropriately designed taxes on sugar-sweetened beverages would result in proportional reductions in consumption," particularly if they could achieve a 20% price hike or more. The WHO saw how tax policy has affected tobacco use and sought to create parallels to sugary beverages such as soda.

The Center for Science in the Public Interest has said around 40 states have special taxes on soft drinks, but it laments that despite raking in more than $1 billion annually, the taxes aren't high enough to actually curb consumption. It says more and steeper taxes are needed, as well as warning labels.

A not-so-refreshing pause

The experience of diet sodas from Coca-Cola (NYSE:KO) and PepsiCo (NYSE:PEP) shows that education is probably a more effective tool. Business Insider notes that U.S. consumption of diet soda has declined by 27% since its peak in 2005, with such sales today accounting for just 25% of all carbonated-beverage volumes sold, compared with almost 30% 15 years ago. Sales of diet drinks such as Diet Coke and Diet Pepsi account for 94% of the fall-off in sales of carbonated soft drinks since 2010, and all of it was achieved without having to impose a tax.

Instead, it was health concerns over ingredients including artificial sweeteners such as aspartame that caused people to abandon diet soda. Once thought of as an aid in reducing obesity, diet soda is now often shunned by those trying to be healthier. Beverage Digest data shows Diet Pepsi volumes dropped an...