Phat Phee?

In a Timesunion.com article, James M. Odato described New York's governor, David Paterson's, first budget plan (HT to Drudge). Given the troubled economic times, it contains a mixture of spending cuts and tax increases designed to close a $12.5 billion dollar deficit. Among the tax increases is a $404 million tax on non-soda drinks that some are calling an obesity tax and which I shall call a phat Phee in a probably vain attempt to be more hip.

I find the article interesting for a couple of reasons. First, President Elect Obama is contemplating $1 trillion stimulus package of tax breaks and spending cuts. Economists have long recognized that state budgetary constraints at times force state governments to work at cross purposes with the federal government. Even if the incoming Obama administration successfully enacts a stimulus package, its effectiveness will be limited by state governments attempting to balance budgets.

Even on a micro level the New York seems to be working at cross purposes with the federal government: one likes domestic sugar growers, the other does not, but both seem aimed at punishing sugar consumers.

The federal government protects domestic sugar producers through a system of quotas that limit the amount of sugar that foreign countries can sell in the United States. These quotas raise the cost of all goods that use sugar and sugar substitutes (I shall refer to both as sugar, the reasoning doesn't change). The benefits of the quotas accrue to a few sugar growing states and are paid for by consumers in sugar consuming states. The federal governments favors sugar growers over consumers.

New York does not like sugar growers. Why should it? It doesn't have many. By taxing a product with a lot of sugar, New York mitigates the flow of federal dollars leaving the state. Its consumers are hurt yet again.

I recommend that people who prove that they lost weight through diet and exercise deserve a tax break. It would be the Phat Pharm Phat Phree Phat Phee tax break.