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Brooks Wilson's Economics Blog

Tuesday, October 6, 2009

William Saleten contributed a fun and provocative article for Slate titled, "Liquid Candy: The new addiction is taxing addictions." His cynicism about the motivation of politicians seems justifiable. Recognizing the political desire to tax, he sees improving health by taxing soda as a positive externality of closing budget deficits, an afterthought.
Now a new class of addictive products has been devised. They're ingeniously easy to produce. Just take any addictive substance already on the market and invite politicians to tax it. The new addiction is taxing addictions...

The quickest way to a politician's heart is to dangle money...
The latest sign of this trend is a report issued last week by the Center for Science in the Public Interest, which lobbies for regulation of harmful products. The press release announcing the report is headlined, "Taxing Soda Could Trim State Deficits (and Waistlines), Says Report."...

The release goes on to talk about the public health benefits of reduced soda consumption. But that rationale, which used to be primary, has now been reduced to a parenthetical afterthought. The CSPI report itself is broken down into three sections. The first section header says, "State Budgets Are in Trouble." The second says, "Taxing Soft Drinks Would Reduce Budget Woes." The third says, "Obesity, Soft-Drink Taxes and Health."

Come on, Senator. You need the money. If you leave it on the table, somebody else will take it. Just visit our calculator and try a sample. It's like taking candy from a baby. In fact, it is taking candy from a baby. And (parenthetically) that's a good thing.
Taxing soda to improve health is yet another nanny state activity. The state does not need to regulate its citizens' diets. We are perfectly able to make choices to maximize our well being, which may not always mean lengthening our years on earth. Riding a Motorcycle is more dangerous than driving a car, but many find the pleasure/danger tradeoff acceptable. Driving an SUV is certainly safer than driving a smart car, but at the margin, some place fuel economy or protecting the environment above safety.

Nor do I believe that taxing soda will do much to increase health like raising taxes on cigarettes because soda has closer substitutes than cigarettes. Rather than buying a soda, consumers might buy a sugary fruit drink, sweet tea, a candy bar or chocolate chip cookie. They are unlikely to buy carrots.

Because sodas have reasonable substitutes, a new tax might not raise as much money in the long run as anticipated. Consumers may adapted by switching purchases to less taxed goods. Even if it increases tax revenues, I prefer fewer taxes with larger bases.

3 comments:

  1. Carrie Cooper6/10/09 6:47 PM

    I agree that people will choose an unhealthy tradeoff for soda if their lifestyle is unhealthy. The government claims that they are trying to improve their citizens' health, but there are many ways to raise awareness without taxing a good. Their intentions are most likely not altruistic. I also am for fewer taxes.

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  2. People with addictions will continue to buy their "drug" of choice. As a recovering alcoholic and a smoker, and addiction is an addiction. Raising tax on anything that people are addicted to won't change their behavior. You can not force someone to give up something they are addicted to because you tax it. You can not help someone who truly does not want help. When the taxes were raised on cigarettes I continued to smoke even as I continue to smoke knowing the health risks. Raising taxes won't change behavior when it comes to addictions.

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  3. Health beverage should be part of our diet to enhance our health and eliminate harmful degenerative conditions that our body may incur.
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    The Right Place. The Right Time

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