Tax Me Baby: The True Cost of Coke

05/23/2010 02:17 pm ET | Updated May 25, 2011

Taxes are inevitable, or so they say. How much we should tax our citizenry, however, is debatable. Tea party members think we tax too much, and many liberals think we don't tax quite enough.

I'm not going to take a position on the overall tax burden right now. Instead, I'll point out two things I hope any reasonable citizen would agree upon:

1. Taxes shouldn't be nonexistent. The government does have some legitimate functions after all, and these functions require money.

2. Smart taxes are better than stupid ones.

So what would ever make a tax "smart"? Answer: If that tax better aligns the price of those goods with the true social costs of those same goods.

Consider how much a can of Coke really costs. To the consumer, Coke is a cheap source of empty calories. (Full disclosure -- I love a cold Coke at lunch!) But over the past few decades, the cost per calorie of drinks like Coke have plunged almost 40%, after adjusting for inflation. Coke is not only delicious. It's cheap!

Cheap for consumers, that is. But not for society as a whole, because the price of Coke doesn't reflect the cost of medical care associated with our nation's obesity epidemic, an epidemic fueled by the low cost of sugary beverages. Nor does it reflect the cost of diabetes care, of cardiology interventions, of joint replacements... of the many medical treatments that have grown in frequency in an attempt to counter the health consequences of our expanding waistlines.

Taxing sugary beverages is smart policy.