The merits of a paternalistic crusade against sugary drinks aside, I really struggle to think of any respect in which Michael Bloomberg’s proposal to ban large cups of sugary drinks is a superior policy to an excise tax on sugary drinks.
For starters, though I doubt in practice that tons of people will respond to this rule by ordering three 12 ounce cups of soda at least some people will some of the time and the policy objective is completely undermined by that loophole. By contrast, a per-ounce tax on sweetened beverages would equally deter all different means of consumption.
But more important, a soda tax would raise revenue. That would let New York City do welfare-enhancing things like give people money, pay Medicaid bills, reduce taxes, improve bus service, or whatever else. If you’re going to do something paternalistic that makes some people upset, you may as well create a clear upside for some other group of people. Indeed, from a pure tax policy standpoint soda is a pretty good thing for a large city like New York to be taxing since a large share of the sodas purchased in New York City on any given day are bought by non-residents but the availability of cheap soda is a not an important driver of NYC employment.
