New York’s soft drink tax
Last month, New York Governor David Paterson proposed adding an 18% statewide tax to non-diet sodas and sugary juice drinks. Though it does have some supporters, the plan has drawn plenty of criticism from nutritionists as well as small-government proponents. Fox News is even getting their fair and balanced panties in a twist about it. Despite all the criticism, I think it’s a great idea.
I know that nobody likes taxes. At the same time, though, most people like police and fire departments that are operational, public schools that can afford textbooks, and courthouses that can handle enough trials. The government needs to collect some tax revenue. The real question is, where should we take taxes from?
Every time the government taxes something, it changes the incentives for doing that thing. Income taxes make working less valuable, because they lower the wages you receive. Sales taxes discourage making purchases. Property taxes discourage owning property. (All these things are really only visible at the margins. Imagine that you have five dollars in your pocket and you want to buy a sandwich that costs $4.95. After sales tax, you can’t afford it anymore. Now, instead of thinking about how much cash you have on you right now, think of it in terms of a long-term budget, and you’ll get the idea.) If we want people in society doing a certain thing, or we want to make sure they are able to, we should keep taxes low on it. That’s why many places don’t tax groceries; they’re a necessity of life. Inversely, if we want people to stop doing something, we ought to tax it as high as is feasible. That’s why cigarette taxes exist, and why there should be a higher tax on gasoline. Taxes allow consumers to consider the externalities of their behavior. The tax is like adding on the social cost of people’s behavior, spread out over each individual act of consumption.
It’s bad that so many Americans are obese. According to Governor Paterson, nearly one in four New Yorkers fits that description. This puts a burden on New York’s medical resources, both in terms of time and space and in terms of funds available for government healthcare assistance. Therefore, it makes sense for New York to disincentivize obesity. They’re not locking people up in prison for it. Just making it a little less appealing.
If a tax can be used to achieve some social good like this, it means other taxes can remain lower (or can be lowered, depending on the current state of things). It seems to me that it’s a win-win situation. Better health in society, better allocation of taxes. Some people (like our friends at Fox News) think that this is cynical and hypocritical. Steven Milloy writes, “Combating obesity is not grounds for the tax; it is, instead, camouflage for it — and not very good camouflage at that.” This is a serious mischaracterization. What happens is, either New Yorkers drastically reduce their soft drink intake, which is a good thing, or New York makes a bunch of its tax revenue off a negative behavior rather than a positive one like working or buying groceries, which is also a good thing. No one is camouflaging anything.
Now, some of the criticism has been more along the lines of, “This isn’t enough.” It’s true that reducing the amount of soda you drink won’t instantly put you at your ideal weight. There are other types of food that are bad for you. Exercise still matters. However, this sounds to me like arguing that if you have anvils crushing both your feet, it’s not worth it to try to move the one on the right. Doing something in this case is still helpful, even though it isn’t everything.
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