How to Think About Public Health Taxes
I don’t know anything about Will Saletan’s article “Sweet Surrender: Taxing soda to make you stop drinking it” other than the title. But I do know the title, and I don’t think that’s the right way to think about the case for taxing soda.
Think about the case for taxing income, via the income tax and FICA. Why do it? Well, to get the money. That’s how we finance Social Security, the Department of Defense, Medicare, interest payments on the national debt, Medicaid, federal aid to schools, veterans’ health care and benefits, the FBI, etc. Now what’s the case against taxing people’s income? Well, it’s that it discourages work and it discourages investment. And that’s bad for the economy. Now we go back and forth over whether any given expenditure has a value that outweighs the economic costs. Liberals, like me, tend to think that a relatively high level of expenditure is justified whereas folks on the right tend to disagree.
But what if we could raise some revenue by taxing something else? Like, say, cigarettes. Or soda. Or booze. Well, then the case for doing the taxing remains similar—you can fund useful programs with it. But the case against looks a lot weaker, since reducing consumption of cigarettes or soda is not so bad. You introducing a little bit of allocative distortion into the economy, but not a huge amount, and you’re improving public health which is going to be beneficial.
There are limits to how much you can raise through these kinds of methods before you create problematic black markets. But at the margin, it makes sense to try to raise revenue through taxing environmental and public health hazards rather than, say, FICA or the ten percent income tax bracket.
38 Responses to “How to Think About Public Health Taxes”
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April 15th, 2009 at 4:24 pm
In that spirit I propose a tax of $500 on gate admission tickets to NASCAR events. Discouraging unhealthy behavior is a noble motive.
April 15th, 2009 at 4:32 pm
Or you could flog the living shit out of anyone who takes your money and gives it to rich motherfuckers on Wall Street when the dice don’t roll their way.
Strange it this may sound to some people, you need to show either that (a) their taxes are being assessed to give them services that they think are valuable — which is utter bullshit at the moment or (b) their taxes are being assessed because they voted to elect some dumbfuck and the voters are being assessed for the price of their stupidity.
I really don’t understand why the Democratic Leadership doesn’t go out on the Mall and tell those dumbfuck Teabaggers the following:
“Listen: It was YOU MORONS who elected George W Bush and the past several Republican Congresses. George and the Republicans ran up $6 TRILLION in debt on their watch — and Republican Presidents Ronald Reagan and George H Bush personally authorized an additional $3 Trillion before then. Just the INTEREST alone on that debt costs us around $600 HUNDRED BILLION every year.
On top of that, George and the Republicans allowed their rich patrons to loot the economy — to drive us almost into the abyss of national bankruptcy. Guess what happens when you “get the government off the back of THIEVES”?
So don’t give us any shit — you’re fortunate that the rest of us don’t pick up ball bats and knock your stupid fucking teeth out. Because we are having to pay a heavy price for your past stupidity and irresponsibility as well.”
————
But that’s the problem with the Democratic Leadership — they are ass-kissing cowards. They run like rabbits.
April 15th, 2009 at 4:34 pm
Doing away with corn subsidies would be a much simpler way to do this.
April 15th, 2009 at 4:36 pm
“Liberals, like me, tend to think that a relatively high level of expenditure is justified whereas folks on the right tend to pretend to disagree, and embrace even higher expenditures on some really questionable stuff.”
There, fixed your typo.
April 15th, 2009 at 4:37 pm
Taxing work increases the incentive to invest because investments are taxed at a much lower rate than work for just about everyone. Aren’t there plenty of studies showing that taxing work doesn’t discourage work?
April 15th, 2009 at 4:41 pm
Roquefort cheese is pretty bad for you, we should slap a hefty tariff on it.
April 15th, 2009 at 4:44 pm
Miller High Life should be taxed out of existence.
April 15th, 2009 at 4:45 pm
How about we tax stupid fucking contrarian columns? Lord Saletan would be paying us till doomsday.
April 15th, 2009 at 4:47 pm
Are you living the High Life?
Blogs should be taxed a lot because they’re bad for your cranium.
April 15th, 2009 at 4:54 pm
Isn’t there also an argument that if the government gets lots of money from soda taxes then the government has an incentive to encourage soda drinking. I have heard something similar said about the smoking, and the de-facto tax that resulted from the settlements.
This is my objection to public lotteries.
What happens if everyone stops drinking soda? Is that a good outcome? I suppose it is better than what we have now, but it could create some weird incentives for state governments.
April 15th, 2009 at 4:55 pm
If that’s your argument–that the case against taxing soda is weaker than the case against taxing other activities–I think your living in a dream world.
The popularity of this idea would be right up there if Gorbachev rationing cigarettes and vodka.
April 15th, 2009 at 5:09 pm
What about the regressive nature of such taxes?
April 15th, 2009 at 5:15 pm
What about the regressive nature of such taxes?
Yglesias has said many times before that regressive taxes don’t bother him since they’ll pay for all kinds of awesome stuff for poor people.
April 15th, 2009 at 5:19 pm
Why anyone pays attention to columns written by noted racist William Saletan is beyond me.
If we must tax unhealthy behavior, why not gambling? How about a 50% tax on all bets placed. I guarantee you that would put a dent in gambling activities and would have huge social benefits. I happen to like soda and I don’t ever gamble, so this tax structure would be OK by me. And it’s about as likely to happen as the soda tax.
As #3 says, doing away with corn subsidies would do more for people’s health than any tax on one particular type of sweet beverage.
April 15th, 2009 at 5:21 pm
But at the margin, it makes sense to try to raise revenue through taxing environmental and public health hazards
Exactly right. Which is why I support a 100% tax on all Apple products, shows at the 9:30 Club, large plasma TVs, and hipster glasses.
April 15th, 2009 at 5:27 pm
I don’t know anything about this blog post other than the title, but I’m pretty sure that Yglesias doesn’t know how to think about public health taxes.
April 15th, 2009 at 5:30 pm
and hipster glasses.
I had to buy a new pair of glass recently. It was striking how almost every pair available followed the same basic design – rectangular shaped lenses.
I remember when I got my first pair of glasses in the 80s. The only style on offer was aviator glasses.
April 15th, 2009 at 5:45 pm
Why stop there? Tax fat content! Tax fat people! Tax salty foods! Subsidize salty people, though. Tax donuts! White bread! Bagels! Hot dogs! Apple pie! Potato chips! Subsidize gym memberships and bicycles!
The police should be required to beat anyone caught wearing hipster glasses.
April 15th, 2009 at 5:52 pm
Uhh, i drink 12 liters of Diet Pepsi a day, and taxing it won’t stop me from drinking 12 liters of Diet Pepsi a day. In fact, I’m about to grab a dp right now. And Matt, if you are reading this, Diet Coke tastes like steel, while Diet Pepsi tastes like happy.
April 15th, 2009 at 5:52 pm
There’s a fairness issue here, though. The cost of my pack of cigarettes just went from $4.94 to $5.85, all to cover SCHIP. I’m all in favor of kids’ health insurance, but why shouldn’t the tax base to pay for it be larger than the 20M of us who still have a nasty habit we can’t easily quit? Why can’t all of society help pay for that insurance?
April 15th, 2009 at 6:09 pm
A good example of a black market is the prevalence of homebrewing and distilling in Sweden, which has one of the world’s highest tax rates on alcohol.
April 15th, 2009 at 6:09 pm
In other words: taxing goods with relatively inelastic demand is more efficient than other forms of taxation. Which is in the opening chapter of any introductory public finance textbook.
Matt may disagree with mainstream economics, but wouldn’t it be nice if he took the time to learn a bit of it before opining?
April 15th, 2009 at 6:20 pm
Re Linkmeister at 20: “The cost of my pack of cigarettes just went from $4.94 to $5.85, all to cover SCHIP.. why shouldn’t the tax base to pay for it be larger than the 20M of us who still have a nasty habit we can’t easily quit? .”
———-
Everybody else here avert their eyes.
Link,
Go to Rite Aid drug store, go to where the pipe tobacco is, and look for a Blue Can labeled “Bugle Boy”.
April 15th, 2009 at 6:30 pm
#3 – there’s no longer a “corn subsidy” that reduces the cost of HFCS. The subsidy operated to pay farmers the difference between the market price and a fixed (and profitable) price. Market prices have gone up because of the federal requirement that gasoline must contain ethanol. Today the price of corn is above the subsidy price, which means that the price that soft drink producers pay for HFCS is either at or above a market price (likely above, due to the distorting effects of the ethanol market).
Of course, the tariff on sugar means that HFCS is a more attractive choice to soft drink producers than sugar, but the removal of the tariff, while good trade and farm policy, would reduce the cost of soft drinks, not raise it.
April 15th, 2009 at 6:44 pm
These taxes basically point out the fact that most liberal pols are a bunch of chickenshits who are too meek to attack problems at the root. NYC has calorie counts on the menus at Yankee Stadium. NYC wants to tax the sugar in your $6 soda. Sedentary behavior causes obesity. NYC gave the private business that is the Yankees $500 million dollars to destroy parkland.
To recap
NYC public health: calorie counts on menus, soda tax
NYC business health: $500 million subsidy, less parkland
And Bloomberg wants a pat on the back for promoting health?
PS – He’s running as a Republican again in the next election. Did I miss something or isn’t the Republican Party going even farther right than when Bloomberg left it?
April 15th, 2009 at 7:00 pm
If your idea is that fat people are creating increased healthcare costs through their habits and that the people who create these costs ought to bear them, then the most equitable way to do that would be a Twinkie Tax. It is certainly far more fair and humane than denying fat people employment or medical care because they increase costs. What you would have to do is (a) ensure that revenues from the tax defray the increased public health costs AND NOTHING ELSE and (b) make it understood that this is in effect a user fee and not a punishment or a social engineering project.
April 15th, 2009 at 7:12 pm
Don Williams @ #23, you’re deliberately missing my point. Broaden the tax base to cover societal needs; don’t target it.
April 15th, 2009 at 8:53 pm
Anyone else think the government shouldn’t be taxing things to try to shape people’s behavior?
Externality taxes, sure – push something into showing its real costs. But that’s not what this question is about, or what cigarette taxes are about these days. They’re about shaping people’s behaviour, especially poor people. (Or just getting away with a tax raise by sticking it to people we don’t like). Taxing income is relatively neutral; it discourages work, but only at the margins. And as long as it’s independent of what kind of work, the behavioural effects aren’t as directed as, say, a soda tax.
But having the government excessively penalize choices we don’t like outside of their actual cost? I don’t think that’s an even remotely appropriate job for the government.
(Also, I drink very little soda, so this tax wouldn’t effect me. I just think it’s creepy and inappropriate).
April 15th, 2009 at 9:52 pm
A nasty habit you can’t quit? So, some guy with a gun orders you to drive to the store, fork over money, open the pack of cigarettes, ignite the lighter, raise one to your lips, then touch it to the flame and inhale? Or he’ll shoot you? No? You do all those things, take all those steps, make a conscious decision to complete each task in the chain, and at no point your will power to quit can kick in? You are powerless to break even one link in the chain? Your mind and body are not in your control? Geez, what a miserable fucking loser of a brain you were born with.
April 15th, 2009 at 10:23 pm
Damn, there are a lot of opinions out there! Where you you people get all these opinions? How about this opinion – who cares? OK, one more opinion, maybe two. Maybe it’s an anti-opinion, and can neuter a few stray opinions already posted. What do you think folks? Any opinions?
April 15th, 2009 at 11:47 pm
Re Linkmeister at 27: “Don Williams @ #23, you’re deliberately missing my point.”
—————
No — I’m ignoring it. I’ve decided broad political points are bullshit — a Kabuki dance put on to con the Rubes.
The only thing to do is focus on the local and personal. That was why I was trying to do you a favor by telling you how to acquire a carton of good cigarettes for around $8 dollars — and not even have to drive to North Carolina. How to evade taxes instead of ineffectually fighting them. Tai Chi. Don’t oppose the power of the State directly — deflect and strike. Grasp Sparrow’s Tail.
Give a man a cigarette and you feed his Jones for an hour. Teach him how to roll a joint and you’ve set him up for life.
Ah, fuck it. So much for my uncharacteristic venture into altruism. Go and Catch lung cancer for all I care.
April 16th, 2009 at 12:20 am
So the government subsidizes domestic sugar production and now wants to tax sugar consumption? If sugar is bad, don’t subsidize it’s production. If it’s not bad, why a sin tax on sugar?
April 16th, 2009 at 4:43 am
So the government subsidizes domestic sugar production and now wants to tax sugar consumption? If sugar is bad, don’t subsidize it’s production. If it’s not bad, why a sin tax on sugar?
OH! You’re my new favorite blogger fyi
April 16th, 2009 at 6:09 am
That’s not me above saying I’m my own favorite blogger. I’m a cranky bastard, not a narcissist.
- joejoejoe
April 16th, 2009 at 6:24 am
You’re missing several others.
1)Taxes are taken at gunpoint, so to maximize freedom from tyranny you need to minimize them.
2)Any money that’s taxed lacks what freely given money has, the threat that it won’t be followed with more if the receivers waste it. Programs funded with taxes die hard.
3)Taxing and spending crowds out the free market (such as with schools.) If you’re throwing free money at a problem, you end up with cases like DC public schools which cost about three times the free market alternative.
4)You get endless disagreements because people can’t choose their own paths and are forced into despised cookie-cutter molds (once again, public high schools that force parents to fund football, evolution lessons, or classes that lead to pointless majors like Psychology.)
April 16th, 2009 at 1:26 pm
Another argument for taxing soda is that it will help bring private preferences more in line with total social costs. Consuming (non-diet) soda leads to obesity and diabetes, and since government-subsidized or -provided health care pays for some of the associated costs, consumers don’t consider the full costs of consuming soda. There is no similar argument to be made for income tax, etc.
April 18th, 2009 at 11:51 am
[...] Matt Yglesias makes a good point about the purpose of “public health” taxes: Think about the case for taxing income, via the income tax and FICA. Why do it? Well, to get the money. That’s how we finance Social Security, the Department of Defense, Medicare, interest payments on the national debt, Medicaid, federal aid to schools, veterans’ health care and benefits, the FBI, etc. Now what’s the case against taxing people’s income? Well, it’s that it discourages work and it discourages investment. And that’s bad for the economy. Now we go back and forth over whether any given expenditure has a value that outweighs the economic costs. Liberals, like me, tend to think that a relatively high level of expenditure is justified whereas folks on the right tend to disagree. [...]
April 18th, 2009 at 1:50 pm
[...] Go here to see the original: Matthew Yglesias » How to Think About Public Health Taxes [...]