Debating the sin tax

I confess: I enjoy a snack of Cheetos from the company vending machine every so often. They’re good right down to the last orange, salty, chemically enhanced crumbs in the bottom of the bag.

Would I give up Cheetos if I had to pay a “sin tax” at the vending machine? Probably not, since I only buy them occasionally. I might think twice about the cost if I were someone who consumed Cheetos every day – but then again, this still might not be enough for me to change my behavior.

There’s increasing public discussion about adding a tax to bad-for-you food items such as soft drinks and high-calorie/sugary snacks. If you make it more expensive for people to buy and eat these things, they’re more likely to cut back and improve their health as a result – or so the thinking goes.

An opinion piece this past weekend in the Star Tribune of Minneapolis makes a strong case for this approach – specifically, for taxing soft drinks. Author Roger Feldman, Blue Cross professor of health insurance at the University of Minnesota, argues a tax on pop would “promote healthful behavior, reduce medical costs and raise revenue for Minnesota.”

He writes:

A pop tax is among the least coercive methods of changing behavior. Rather than banning pop or restricting access to it, a pop tax nudges consumers to drink less pop.

Would a pop tax overextend the government’s power to regulate personal choices, including the choice to make oneself fat?

In fact, people would still have that choice, but the price of pop would for the first time reflect the cost that personal choice imposes on others – through higher health care spending, lower productivity and other negative costs.

If the online comments are any indication, this is not an idea likely to go over well with the public.

“The same old story – it is bad for you so we must tax it to cause you to consume less of it. The reality: The government is looking for any reason to raise taxes,” one person scoffed.

“Cradle to grave socialism/social-engineering,” was someone else’s assessment. “Butt out, leave us alone.”

This is the emotional side of the argument. A bigger question is this: Are sin taxes actually effective at changing people’s behavior and lowering health care costs? The evidence so far is mixed. Some studies have found that raising the tax on alcohol and cigarettes leads to lower consumption; others have concluded that it makes little overall difference.

The price effect seems to be stronger among youths and young adults. There’s fairly consistent evidence that when alcohol and tobacco taxes are raised, it discourages people in this age group from drinking and/or smoking.

Larger tax increases appear to be more likely to affect consumption than small or moderate increases in sin taxes. Consumption patterns may matter too. Higher alcohol taxes seem to somewhat discourage drinking among moderate drinkers, according to much of the public health research – but increasing the sin tax generally has a minimal effect on individuals who are frequent or heavy smokers or drinkers.

To add to the debate, new research at the University of Iowa suggests that taxing consumers for their package of cookies in the grocery checkout line is simply an inefficient method of promoting reduced sugar intake. The study, which appears in the Contemporary Economic Policy journal, argues that if the goal is to change people’s behavior, it’s more effective to tax food processors for how much sugar, corn syrup and other sweeteners they add to the product before it reaches the store.

In a news release accompanying the release of the study, one of the researchers, Helen Jensen, said, “We spent quite a bit of time assembling a data set based on published data on what inputs the food industry uses. So we know that for all the different food sectors, how much sugar and corn syrup go into that industry group’s food processing. You’d be amazed to see how much sweetener goes into food processing.”

I don’t think this debate will be over any time soon.

Photo: Wikimedia Commons

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