Soda taxes are also a regressive tax on the poor, as are almost all consumption taxes. Let's see, back of the envelope math: I drink about $5 of soda a week, stipulate a 3% effective tax rate, that implies I 60 cents of soda taxes a month, or less than .02% of my income. By comparison, a poor mother with two kids might well buy $25 of soda a week (three mouths plus they consume it more than I do), paying $3 of sin taxes per week, which could be over a full percent of her income.
The prospect of that enrages me, far more than my opposition to tax increases in general.
That poor mother with two kids is disproportionately likely to be overweight or obese, and that $25/week of soda is only making things worse. Due to medicaid/SCHIP, her health care costs are the problem of all taxpayers.
It doesn't bother me to force her to internalize some of the costs she is inflicting on me.
Similarly, I don't mind taxing polluters in proportion to the pollution they emit.
(As of 2014, this argument applies to all Americans.)
It doesn't follow that fat people incur more medical expense just because they're less healthy. Most healthcare expense is incurred while elderly, and the younger you are when you die the less it costs to treat you throughout your life. With regards to tax revenue, the ideal time for you to die is right after retirement, and the obese come much closer to approximating this than the thin.
Good, and bleak, point about dying once you retire.
I wonder how retirement costs compare to lifelong cost of being obese. According to stats cited by the CDC (http://www.cdc.gov/obesity/causes/economics.html) about 9.1% of medical costs can be attributed to treating conditions associated with being overweight or obese.
This is the problem with this form of healthcare. First we insist on socializing these costs then the socialization of costs is used as justification for meddling in the details of other people's lives. After all, as you said, now it's inflicted on you. Since respecting individuality and autonomy is only important to a tiny percentage of the population I don't see it getting any better either.
This is the problem with ALL health insurance, national or not. Unless everyone starts paying for everything out of pocket, some will take more than their 'share'.
To make a larger point, the problems of others are your problems as well. If I never have kids, an education system isn't something I should be concerned with by this logic, yet I'd hate to live in a country without a public one.
With health insurance, some will take more than their share by chance. Everyone will pay their actuarial cost (i.e., the expected value of their future medical expenses), and fat people will pay more. I.e., if the average fat person has average medical expenses of $3000, and the average thin person has average medical expenses of $1000, the thin person pays $1000 and the fat person pays $3000. I don't care what you do, since you will pay your own average medical costs.
With health insurance where costs are regulated (such as obamacare or our current employer provided health care), both people will pay $2000.
I dislike regressive taxes as much as anyone; but the point of this tax is to encourage that poor mother not to buy $25 of soda a week. I grew up in a middle-class household that could've easily afforded a 24-pack of Coca-Cola every day, but we only had soda as a rare treat: a rootbeer float once a month or so. If we were thirsty other times we'd go for the pitcher of water in the refrigerator.
I don't want to get all "uphill both ways" with this, because I really don't feel that I was deprived--I just think a tiny step toward a healthy lifestyle like that shouldn't be reserved only for the wealthy.
Taxing activities in proportion to their chance of future burden on society makes sense to me (i.e. healthcare costs), as I believe individuals ultimately choose their lifestyle.
If it were up to me, taxes like this would be based on the same modelling that insurance policies are. People would choose what they lived like and the price would reflect the risk they are undertaking.
To me, this sounds like a pretty good argument for not unnecessarily burdening society with costs to the individual - like healthcare. A future where the government evaluates all your behavior and taxes you accordingly seems a little dystopian, no?
If healthcare is all paid for by the individual, what happens when people can't afford the treatments they need? That path seems equaly dystiopian to me.
Then they die. I don't see anything dystopian about natural selection in action. It's been happening for the last four billion years, and we wouldn't have gotten anywhere without it.
If we agree that both scenarios are equally dystopian, perhaps this suggests that we as a society need a far more creative solution than the ones we're currently squabbling about - instead of trying to implement one or another path to a dystopian outcome. No need to rush headlong into a mistake.
I definitely do not agree they are equally dystopian.
In the "pay for yourself" dystopia, the poor and uneducated continue to eat poorly and die early, horrible deaths. [I know this is hyperbole, but is somewhat supported by literature on type II diabetes risks etc]
In the "tax the risk" dystopia, the poor and uneducated are essentially given a prodding to make better choices, while still leaving that choice as an option.
In the current system the true cost of poor choices is deferred onto the rest of the population. We currently all pay the tax for poor choices of individuals. This gives no real incentive to change behaviour, and given what we know about ego:willpower interactions doesn't help a large portion of the population.
They aren't equally dystopian, they're dystopian to vastly different degrees. The current situation is an unsustainable disaster for millions of people, which is why many of us aren't content to let things stagnate while we think about it for another 3 presidential terms.
I actually agree with you that we're rushing headlong into a mistake; I just think it's a lesser mistake than the one we're rushing headlong from.
Medical treatment for everyone who needs it paid for by taxes on the people who make lifestyle choices which will require more medical treatment makes sense to me.
Absolutely. Then people have a choice, and if they still have the condition after making good choices society looks after them, so we aren't penalising for genetics/random effects. Win win.
The whole point of the tax is to discourage consumption. If Ms W. Queen can't afford the tax to feed concentrated diabetes inducer to her little angels, then good! Success!
Non-diet soda is almost as bad as cigarettes and we should tax the freaking hell out of it.
It depends on how high the tax is and how elastic the demand for soda is. If the soda tax isn't high enough than people will continue purchasing and pay the tax. An extra couple of cents on a can of soda likely won't change consumption and will only hurt the poor more.
I am guessing that the elasticity of soda is a lot higher than cigarettes so it would take a lot smaller of a tax to change behavior. And to be honest most sin taxes are really not there to change consumption they are their to make money because they know people will pay for it.
Look at the recent increase in the cigarette tax that is supposed to pay for S-Chip. They don't want smokers to smoke less, because that would reduce revenue and prevent them from paying for the program. They set the taxes at a level that will maximize revenue and not greatly affect consumption.
Update: I just read here http://seekingalpha.com/instablog/137417-wall-street-strateg... that the new england journal of medicine says that the price elasticity of demand for soda is -.8. What that means is that demand for soda is inelastic. This means that soda is just like any other sin tax. It is not meant to actually reduce consumption. It is meant to create revenue. Yes some people will consume less, but the vast majority will not consume less. So I hate to say it, but this isn't a tax for the health of the American public, but a tax for the wallet of government.
There are two purposes to a sin tax: reducing consumption or compensating society for the loss caused by the sin. A perfect sin tax is set at such a level that no one needs to care which one occurs.
If a soda drinker inflicts $0.03 / soda on society, the perfect sin tax would also be $0.03. In such a regime, I don't care how much soda you drink since you are paying for your own health care via the sin tax.
Yes, the externality is being paid for in that instance, which depending on your viewpoint is a good thing. But if that is the case that we only want to pay for your stupidity in drinking soda, than they shouldn't be pitching something that is for the health of the people, because it isn't.
Which brings us to the entire problem of a government run health care program. Anything deemed bad for us will be taxed and pitched as the fact that it is for the health of the people instead of to cover the costs of your choices on society.
And yes, I realize that a person who drinks a soda in a free market healthcare system still affects the cost of my insurance, however it is to a far less extent than when I am the one paying for my neighbors drink.
I like how you're so optimistic that you imagine somebody actually checked the elasticity when considering this tax.
I'd have guessed a big enough tax might make natural juice more competitive. I don't think you have many people who'd prefer Fanta over a natural, carbonated juice - at the same price.
100 kcal/soda x 1 soda/day x 35 days = 1lb of body weight.
I'm currently slightly overweight at 220lb (6'4", BMI 26), and my current lifestyle exactly maintains my weight (varies from 220-225). If I drink 1 8 oz soda/day (I currently drink none), I would become obese in less than 3 years.
Granted, if I also eat brownies, soda won't be solely responsible. Doesn't mean that soda didn't contribute.
>Non-diet soda is almost as bad as cigarettes and we should tax the freaking hell out of it.
Actually diet soda (artificially sweetened and artificially flavoured carbonated water) is shown in studies to be unhealthy too:
"Although these observational data cannot establish causality, consumption of diet soda at least daily was associated with significantly greater risks of select incident metabolic syndrome components and type 2 diabetes." [http://care.diabetesjournals.org/content/32/4/688.abstract, "Diet Soda Intake and Risk of Incident Metabolic Syndrome and Type 2 Diabetes in the Multi-Ethnic Study of Atherosclerosis (MESA)"]
and more recently has been fingered as a cause of increased obesity.
Ironically, many NYC public schools have Snapple machines (I think the city has a deal w/ the company) with all sorts of sweet beverage enticements. The older students often go to MacDonalds, which seem to thrive in poor neighborhoods near schools, because the cafeteria lunch is so bad. It seems Bloomberg emphasises how the tax revenues could be used to fight obesity because he realizes a tiny price increase will have no real effect on consumption.
I also find it ironic that the federal gov subsidizes the production of corn syrup while local governments try to tax its consumption.
I've never understood these types of taxes. Whether it's the fat tax or the cigarette tax.
If you have a real need for additional revenue to support specific programs then why base that revenue on something that you would like to end. If you get what you say you want (i.e. reduced consumption) then your revenue decreases which will force you to find another source of revenue.
This really only makes sense if they know there is no way that it will reduce the activity they are taxing. In that sense I think the author is wrong. I do believe there is a small group that will react quite strongly to taxes like these but there is usually a larger group that seems to support them. They don't see it directly having a huge affect on them so it's easy to get behind it and feel good about it as you are helping to make people healthier.
Of course if the revenue gained by taxing these products was ONLY used to fight issues caused by them then the tax could potentially be successful because as usage waned then you think you'd need less revenue to support the resulting effects of consuming those products. That usually isn't the case however as most of these taxes get passed due to immediate budget shortfalls.
If you have real budget problems then the only answers are to either cut spending or tax something that is consumed by nearly everyone. However, taxing something that effects everyone is much harder to get approved which is why they go for the easy targets.
If you get what you say you want (i.e. reduced consumption) then your revenue decreases which will force you to find another source of revenue.
The cynic in me would say that there's no real end to the list of behaviors our government would like to engineer out of the population.
The benefit to them is two-fold; a possibly short-lived, but endlessly repeatable, source of income, and a populace ever more willing to accept government manipulation.
The title posted here distorts the meaning of the second sentence of original paragraph, which says, "Higher prices are bad. Being told what to do is worse." As the article points out, being taxed is _not_ same as being forbidden.
Also, there seem to be _two_ agendas for the tax: 1)raising tax money and 2) discouraging consumption of "empty calories." I can't tell from the story whether legislators have prioritized between the two.
If it's the first... then bottled water (who virtue/worth is a whole other discussion) could be taxed as well.
If it's the second... then aspartame (or plain water) ought to be favored over sugar/corn_syrup by the tax. And that is rather like taxing cigarettes, alcoholic beverages, etc.: essentially taxing risky (or costly-to-public-welfare) behavior.
Your comments make me not want to be a HN member, I would think most of you would have a better understanding of economics rather than the Keynesian crap they teach in school.
anyway, most studies show being fat is far healthier than being skinny or morbidly obese.
I can see how a ban can continually generate reactance, because you'll be reminded of it every time, but a consumption tax will probably only see a smal reactance at the start, and as soon as people forget about it, consumption levels will drop accordingly.
I think most of these "sin" taxes are taxes first with a justification added later.
The cigarette tax may be morally justified as a way to reduce smoking and save lives. According to the CDC smokers tend to live around 14 years less than non smokers.
However, I've read that the justification that "smoking cost society money" is not factually correct. Premature deaths due to smoking tend to occur earlier and more rapidly and thus are cheaper than supporting someone into their old age followed by a long hospital stay before death.
I agree. If the government needs tax money for schools and is having a hard time getting it from the taxpayers directly, it's easy to just pick an emotional justification like "helping make society healthier" by "reducing" smoking or soda consumption. The actual consumption doesn't go down but the tax dollars do go up. The poor get poorer.
And what about the people that consume soda in moderation and in addition to healthy food? I have soda every day. I also exercise every day and am in very good shape. Not everyone who consumes soda is obese or diabetic. If you really want to punish someone, why not do it in a way that doesn't affect everyone else? If you want a "fat tax", why not do it based on the health of the individual?
They could also just give you a fitness test once a year at the IRS office and tack your unhealthy choices onto income taxes.
For the middle class, this would be more optimal than taxing soda, since it rewards the outputs rather than the inputs. For the poor (who mostly don't pay taxes anyway), this wouldn't work so effectively.
The prospect of that enrages me, far more than my opposition to tax increases in general.