Free Markets, Free People

sin tax


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


Sin Taxes To Fund Health Care?

First they came after the smokers. But I didn’t say anything because I don’t smoke. And then they came after the soda drinkers, and I didn’t say anything because I rarely drink soda.

But then they came after beer, but I couldn’t do anything because the precedent had been set (with apologies to Pastor Martin Niemöller).

Yes, sinners, you are going to pay for health care. You and the evil rich. “Sin” taxes are seemingly the chosen method of this administration for paying the bill for the upcoming health care debacle.

Consumers in the United States may have to hand over nearly $2 more for a case of beer to help provide health insurance for all.

Details of the proposed beer tax are described in a Senate Finance Committee document that will be used to brief lawmakers Wednesday at a closed-door meeting.

Taxes on wine and hard liquor would also go up.

Apparently they’re still discussing sugary drinks as well (although it seems diet drinks are not yet on the table) because, you know, obesity is a problem and since government will be paying for all of this (can taxing Oreos be far off?).

But remember:

“If you make less than a quarter of a million dollars a year, you will not see a single dime of your taxes go up. If you make $200,000 a year or less, your taxes will go down.”

Unless, of course, you’re a smoker, a fattie or a boozer (or, heaven forbid, all three).

~McQ