If you lived in Richmond, California, would you vote yes or no for their proposed soda tax?
The tax is unusual because it does not charge people at the register. Instead, retailers would have to pay a license fee that is based on how many ounces of SSBs (sugar sweetened beverages) customers purchase. The city expects sellers to increase prices because of the fee.
City councilmen who like the proposal remind us that half of the children in Richmond are obese and that they can use the $3 million they project for sports fields, children’s diabetes treatment and nutrition education. An economist might add that the fee is Pigovian named after Arthur Pigou (1877-1959) who supported the concept because it discourages undesirable behavior and raises revenue.
On the other side, City Councilman Corky Boozé said it is unfair that the tax targets the poor. In a more affluent community, residents have the ability to avoid it by traveling elsewhere but not in Richmond where few people can afford cars. ”I eat sweet potato pie and candied yams,” he added, “And what about cupcakes? Are they going to tax them?” Predictably, one store owner worries that his business would suffer if he passes along the entire fee of 68 cents on a 2-liter drink to his customers.
Opponents also point out that the license fee is regressive. With a regressive tax or fee, the poor pay a higher percent of their income than those who earn more. Assume for example that 2 people both buy the same item and pay a $10 sales tax but one earns $100 a year and the other, $1000. The first individual is paying 10% of her income while for the second, it is 1%.
So many issues…
Do you believe the license fee is fair? Do you care if its impact is regressive? Do you like a Pigovian approach? Does it reflect an appropriate role for government?
In November, at the Richmond polls, how would you vote?
To read more about soda taxes, this NY Times update discusses New York City’s large size sugary beverage ban and here, here and here econlife looks at soda and fat taxes. For an academic approach, this Chicago Fed paper also focuses on the impact of soda taxes while details about the Richmond proposal are in this PBS interview, this NY Times article and a WSJ story.
To fight obesity, do you support government funded weight loss education? Soda taxes? Mandatory menu calorie counts? Banned bake sales?
A recent Intelligence Squared debate provided several answers. The evening focused on the proposition, ”Obesity is the Government’s Business.” Opposed were libertarian journalist John Stossel and The Obesity Myth author, Paul Campos. On the pro side were former U.S. surgeon general, Dr. David Satcher and a Pew Foundation scholar on nutrition and metabolism, Dr. Pamela Peeke.
Even before the introductions were complete, Stossel compared prohibition to proactive obesity policy saying, “They mean well but they do more harm than good.” During the evening, he and Campos emphasized 5 points:
- When it tries to regulate private behavior, government is overextending its power.
- A more effective incentive, privatized health care would force people to bear the cost of unhealthy behavior.
- There is no clear dividing line between healthy and unhealthy food.
- We might be demonstrating prejudice about body size.
- Science has not definitively proved the correlation between between obesity and higher mortality rates.
On the pro side, after starting with a story about policy makers, Dr. Satcher shared a plethora of statistics that included burgeoning obesity rates, diminished exercise and diabetes, hypertension in children and adults. The basics of the pro position included 6 ideas:
- “Obesity is an epidemic.”
- Obesity creates increased risk for cancer, heart disease and diabetes.
- Obesity adds substantially to our national health costs.
- It is government’s responsibility to fund the fight against obesity.
- It is government’s responsibility to diminish the availability of unhealthy foods.
- When we diminish the consumption of unhealthy foods with taxes and less advertising, long-term health care costs drop.
You can watch the debate here.
An Economic Lesson
Economically defining cost as sacrifice, whenever government helps one group, others and/or the same people experience a cost. More spent for controlling obesity means we sacrifice more spending in other areas. Or, it means we sacrifice lower taxes. Or, we sacrifice individual freedom. But, we enjoy the potential benefits of controlling obesity when the initiatives are successful.
An Economic Question: Referring to the points cited by the pro and con sides of ”Obesity is the Government’s Business,” defend the side you support.