Sin Taxes Get Results -- Mainly In Making Smug Legislators Feel Good
There's this rush to pass soda taxes lately -- which the Competitive Enterprise Institute's Michelle Minton calls a "failed experiment that needs to end."
Sin taxes have existed since at least the reign of Queen Cleopatra VII of Egypt, who legend has it enacted a tax on beer to reduce public drunkenness and raise money to war against Rome. Also known as "lifestyle taxes," sin taxes are placed on goods based on the notion that increasing the price will discourage individual behaviors perceived as unhealthy--like smoking--or dangerous when consumed irresponsibly--like drinking--and as having negative effects on society. At the same time, these taxes raise revenue to offset the supposed public costs of the supposedly harmful products being taxed, or to fund other government programs. Today, public health advocates champion taxing sugary foods and drinks, like soda, as a way to fight obesity.
Except...oopsy!
In a survey of 8,000 households done before and after implementation of the soda tax, researchers at the Mexico Autonomous Institute of Technology (ITAM) found that those in the lowest socioeconomic strata were least likely to reduce soda purchases in response to the price increase. This may be due to wealthier people having access to a greater variety of substitutes or those in lower socioeconomic levels seeing soda as a luxury item they are not willing to give up. Whatever the reason, the result is that those with the least amount of money are paying a greater proportion of the soda tax, which raised $1.3 billion for the Mexican government in 2014.The most surprising finding from the ITAM study was that homes with an obese head of household were least affected by the change in soda prices, meaning that those individuals whose behavior the tax was designed to influence were the least likely to respond.
Even if sin taxes manage to influence sales or consumption decisions, there is no guarantee the effect will remain constant over the long term. In Finland, for example, a 2011 tax on confectionery items reduced sales of sweets at first, but within a year media and shops reported that sales had returned to pre-tax levels. Similarly, the Mexican soda tax correlated with a decline in sales volume of 1.9 percent, but rebounded the following year--increasing by 0.5 percent in 2015 over the previous year's sales.
One of the best ways to decrease obesity would be to build a time machine and go back and stop all the government bureaucrats from pushing the public to eat a high-carb, low-fat -- and scientifically unfounded diet.
People drank soda long before American blimped up. The difference was that they ate fatty (and thus satiating) food, so they weren't jonesing for sugar and snacks all day.
Look at a picture of a crowd from the 50s versus a crowd from, say, 2005. Or go to the Atlanta airport -- one of the scariest places I've been, vis a vis the large number of morbidly obese people moving through the place.
What made Americans so fat? No, not soda, which, again, they drank in the 50s, but meddling bureaucrats who were sure they knew what was best for us.
via @Mark_J_Perry
Except the recent Philadelphia soda tax wasn't about obesity. It
was a pure money grab, as even diet soda gets the same tax.
Ron at June 25, 2016 4:47 AM
Look at the meddle-y, meddle-y and the excuse:
http://articles.philly.com/2016-06-12/news/73706084_1_diet-beverages-beverage-tax-diet-drinks
Amy Alkon at June 25, 2016 6:07 AM
They are just grubbing for revenue. It won't work.
Isab at June 25, 2016 6:19 AM
Sin taxes are easier to pass. Tax the fat guy, the smoker, the gambler, the sinner. When the sin tax crowd gets to your sin, you wont' have enough allies left to defeat it (first they came for the smokers and I don't smoke....).
It's the same logic behind the "education lotteries" that make state-enabled gambling addictions more palatable. Let's ignore the fact that amounts equal to the estimated lottery revenue are removed from the education budgets every year so the education budget is effectively flat. We're supporting schools with every ticket we buy, right?
Conan the Grammarian at June 25, 2016 7:06 AM
I'm anti-tax. But, given that I'm as into self-interest as the next guy, if we're going to have taxes, I'd as soon they be this sort, that I can avoid if desired, than ones I can't. Which is why I favor a national sales tax over an income tax.
A one soda a day habit raises your risk of diabetes by 20%. You're truly better off drinking a beer or glass of wine with your Value Meal.
momof4 at June 25, 2016 9:12 AM
There is also an ignorance of incentives issue here. They always assume the new tax doesn't change behavior and calculate future budgets with that false assumption. Low and behold as whatever sin item goes up in price people react. And those new choices may not be to the sin being taxed. Raise the tax on gasoline and people find other areas to cut back spending, resulting in loss of tax revenue in supposedly unrelated areas. Specialty taxes can even result in net loss in tax revenue as people work harder to get around the rules.
And then there is the growth issue. Bureaucrats are almost always less efficient with money than free market individuals. The Keynesian multiplier is quite real, but it is less than one. So for every dollar taxed you typically see a loss of 20 cents GDP. That lost growth in the private market results in lower taxes for the politicians to play with.
Ben at June 25, 2016 9:13 AM
Since most of the lower income people's health care is paid for by medicaid, if the tax were to be used for diabetes treatment or education, I might get on board.
Same for cigarettes. If the taxes were used for emphysema treatments and prevention, then fine.
But the money is never used that way. It's just a dollar grab.
Claire at June 25, 2016 10:45 AM
Look at a picture of a crowd from the 50s versus a crowd from, say, 2005. Or go to the Atlanta airport -- one of the scariest places I've been, vis a vis the large number of morbidly obese people moving through the place.
What made Americans so fat? No, not soda, which, again, they drank in the 50s, but meddling bureaucrats who were sure they knew what was best for us.
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Or, just as likely, the fact that a LOT of people in the 1950s still didn't have television - or anything much besides books that required sitting still. Being physically active was more tempting than it is now. Also: It's possible that housework (of all kinds) took more physical effort back then - but I'm not sure just how many people in the 1950s still didn't have access to washing machines, for example.
lenona at June 25, 2016 11:20 AM
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Or, just as likely, the fact that a LOT of people in the 1950s still didn't have television - or anything much besides books that required sitting still. Being physically active was more tempting than it is now. Also: It's possible that housework (of all kinds) took more physical effort back then - but I'm not sure just how many people in the 1950s still didn't have access to washing machines, for example.
lenona at June 25, 2016 11:20 AM
Yes, and most adults smoked. So they were thin, but had woefully short lifespans compared to people who have taken some care of themselves.
While morbid obesity is a bad thing. *Thin * doesn't necessarily equal healthy.
Isab at June 25, 2016 11:44 AM
"They always assume the new tax doesn't change behavior and calculate future budgets with that false assumption. "
It's even worse than that. Sin taxes are touted as things that will improve public health, and thereby reduce government expenses. That's based on the assumption that the tax will be successful in reducing the taxed behavior. But at the same time, as Ben points out, planners assume that the tax will bring in a bunch of new revenue because it won't change the targeted behavior.
So no matter which outcome actually occurs, the tax fails to achieve its stated goal. Unexpectedly!
Cousin Dave at June 27, 2016 7:04 AM
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