Free Markets, Free People

The sin tax gambit

We’ve talked, at various times, about sin taxes. Recently, however, the focus has been on taxing sodas. Coke. Pepsi. Mountain Dew. Gatorade. Red Bull. Of course, as with all “sin taxes” the supposed reason for them is to save you. That’s what the cigarette sin tax was about (while the government continued to pay tobacco subsidies).

So let’s review the official reason for saving you from yourself:

Of course, policymakers never sell “sin taxes” as a revenue generator. It’s all about public health. This time around, they preach to us about America’s “obesity epidemic,” a largely self-induced affliction that at least one billion of the world’s population probably wouldn’t mind having.

The causes of obesity are the same as they’ve always been—excessive caloric intake, lack of exercise, and genetics—but politicians say they have a solution to this age old problem that is as easy as, and healthier than, pie. Save the sinner: tax the sin. To summarize the logic of a recent report in the New England Journal of Medicine—making soda more expensive will force people to consume less soda and lose more weight, all while raising much needed tax revenue.

Have you ever heard such a tax presented as “hey, we’re in debt and need the revenue?” Of course not – “obesity” is the new crusade and taxing behavior we don’t want is the way to “prevent it”. But as Rob Raffety points out, soda – sugary drinks – are simply one of a veritable universe bad caloric decisions one can make. And, even if those are taxed to the heavens, unless the government can require exercise and reverse genetics, it’s approach and focus on one tiny part of the problem really doesn’t solve anything – does it?

Proof?

More to the point, the very thing that makes sin taxes, or the soda tax, so successful at generating revenue is that they rarely achieve the desired health effects for which they are ostensibly adopted. This is because the degree to which people change their behavior in response to a tax varies widely depending on how high the tax is and how sensitive consumers are to the change in price. Consider Arkansas and West Virginia – both states levy taxes on soda; both rank very poorly in obesity, 10th and 3rd respectively. Are the residents of these states measurably better off—any less obese—because they pay higher prices for pop?

It’s practically impossible to project any positive health effects of the soda tax due to the plethora of high-calorie substitute beverages available to consumers. As noted in a recent report by my colleague at the Mercatus Center, Dr. Richard Williams, someone who swaps a Pepsi for an apple juice, milk or lemonade is actually consuming more calories than before. Exactly how beneficial to one’s waistline is a policy that potentially shifts consumption to from a can of soda to a beverage that has more calories?

Said another way, the only possible way for there to be any health benefits derived from this sort of a tax is to make the tax a broad based one that covers all “unhealthy” high caloric food or drink and their alternatives to the point they’re too expensive to buy. And again, that doesn’t address the questions of exercise or genetics.

So what is a tax on soda? Simply another in a long line of revenue generators presented to the gullible among us as an attempt to make us more healthy. Taxing Ding Dongs and potato chips wouldn’t be far behind.  But there’s a basic inescapable truth to this sort of a tax that our government overseers would prefer we just ignore:

After all, if the tax worked, people would stop drinking soda and it wouldn’t raise any money at all. In other words, the notion that the true purpose of the soda tax is to make people healthier is all wet.

For those in doubt, revisit the tax on cigarettes. And besides – it’s really none of the government’s business (or it wasn’t until HCR passed, huh?).

[HT: Eliza]

~McQ

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14 Responses to The sin tax gambit

  • Have you ever heard such a tax presented as “hey, we’re in debt and need the revenue?” Of course not – “obesity” is the new crusade and taxing behavior we don’t want is the way to “prevent it”.

    There’s a very good reason why taxes are not presented this way.  If there’s one thing people in power have learned, it’s that the argument from effect does not work.
    It’s the same thing as people saying that capitalism will lead to lower prices and better quality; socialists don’t care about that.  What they care about is that they think it is immoral to have self-interest.  So long as capitalism’s defenders continue to preach efficiency while sidestepping around morality, they will be completely ineffectual at spreading freedom.
    In a similar vein, the government never argues for a sin tax based on economic reasons; that would never work because people are already concerned with the government’s lack of fiscal responsibility and would see this as giving an alcoholic a “pity fifth”.
    On the other hand, by appealing to the [im]morality of their constituents, politicians have a decent shot at garnering support for this new tax.  “Government is the wise, benevolent leader of the masses, and it is always looking out for its citizens.  It is moral, therefore, that we step in and protect you from yourself in the only way that we can safely do so:  by imposing a tax.”
    Whether the government imposes a tax, or the police break into every convenience store and steal all the soda, or the military shows up and forcibly shuts down manufacturing plants, it’s all the same:  our leaders are trying to use violence to solve a “social problem”.
    Fortunately, most people don’t like violence (so much so that they usually try to justify or evade that previous paragraph when I bring it up), and that is why I think this is the most effective argument you can make when defending capitalism and opposing statism.  Point out the violence and let people understand how they are playing a part in inflicting it on others.

    • Or to put it in other words, “It’s nobody’s goddamn business what the hell you want to eat or drink. “

  • “The causes of obesity are the same as they’ve always been—excessive caloric intake, lack of exercise, and genetics…”

    This phrase in the post set me off and I have to present my testimony.  I won’t mention the particular book that gave me the information;  you can get it on Kindle or from any bookstore.  I was looking for a way to lose my “beer gut” without being on a diet that I could not live with permanently and also without doing any exercise.  Tough order.  The Adkins diet didn’t work for me and nothing else seemed to be effective, even eating much less.  The new theory that worked for me (the book says that only 40% of the population has the genetic makeup that this will work for) involves eating much less sugar and fewer “bad” carbohydrates that break down quickly in digestion into sugar.  You see, according to their theory, the resulting high level of sugar triggers your pancreas to secrete insulin.  OK so far, but the insulin sticks around in your bloodstream after it takes care of the excess sugar.  A high level of insulin signals your body that you have just “feasted” and that it is time to store fat.  So even if you eat much less, if what you eat has too much sugar or bad carbs that digest quickly into sugar, you still put on (or keep on) the fat.  The trick is to keep the insulin at a normal level so that the fat-storing signal never goes off.
    In my case, with no exercise and eating a normal amount of food (no potatoes, pasta, candy, etc.) I dropped the gut and now have a 36″ waist instead of 38″, feel great and I have been able to reduce the amount of medication I take for high blood pressure and bad cholesterol.
    True story.  It has been a year now and although I still long for the french fries, cheeseburgers (it’s the bun) etc., I have learned to love whole wheat stuff (slowly digested – keeps sugar low) and dropped 25 pounds (and the gut) permanently.  Did I say no exercise?

    • Actually, McQ, I recommend “Good Calories, Bad Calories” here. There’s a libertarian angle, too: The government may well have enshrined completely wrong science w.r.t. to how people get fat. If it does turn out that HFCS is responsible for most obesity in this country, then it’ll be a government double-whammy, both for aggressively promoting wrong causality on how people get fat, then for subsidizing corn production to make HFCS cheaper than sugar. If both of these are true, the government has no moral authority to be lecturing us on why we’re fat, as it has been largely their fault. I don’t consider this theory proved, but the probability has been going up.

  • Sin taxes appeal to the universal belief that we all know how to live our neighbor’s life better than he does.  “Look at that fat person!  Disgraceful!  Doesn’t he know that he needs to eat less?  I know: I’ll FORCE him to eat less by making those nasty ol’ Cokes and potato chips cost too much!  I know what best for him because I’m smart and good and benevolent.”

    Most of us learn to control this impulse.  Those who don’t usually become liberals.

    McQSo what is a tax on soda? Simply another in a long line of revenue generators presented to the gullible among us as an attempt to make us more healthy. Taxing Ding Dongs and potato chips wouldn’t be far behind. 

    Small potatoes.  I’m waiting for our rapacious, intrusive benevolent, wise government to start mandating annual “health and wellness” exams… and taxing people who don’t meet the standards.  “Mr. Smith, your BMI is 3 points higher than the upper limit.  Tsk, tsk!  That’ll be a $300 fine.  Please pay at the front desk on your way out.  Oh, and here’s some literature on weight loss.  See you in six months, tubby.  NEXT!”

    • Most of us learn to control this impulse.  Those who don’t usually become liberals.
       
      Just another side of the same coin as puritans, prudes, and the Taliban.  They ain’t happy if anyone else is happy.

      • Yes, you’re right.  Insufferable busybodies are not confined just to liberals.

  • They can take my Doritos when they pry them from my cold, dead hands.

  • I’ll know they’re serious about it being a “sin tax” when they exempt diet sodas with zero calories. Not holding my breath. But if they don’t, “sin tax” is a flat-out transparent lie.

  • I drink diet Coke, so I say tax away.