Gov. Paterson's Tax Hikes Include Ridiculous Tax on Non-Diet Soda

December 15, 2008

New York Gov. Paterson is looking for new revenue sources, some of which would move the state in the direction of better tax policy. But as is usual with politicians, he is looking at selective sources to raise revenues, including a tax on non-diet soft drinks.

Let's walk through the logic of such a tax. Just because a tax raises revenue is not a defensible reason to impose it. I could use that same logic by suggesting a tax on diet soda only or a tax based upon the number of blades of grass in one's yard.

One justification typically offered is that soda somehow imposes negative costs on others in society. So this is Pigouvian in nature. But a Pigouvian tax should be levied even if you don't need to raise revenue, not just because you are in a fiscal hole. If non-diet soft drinks are so bad for society, then the tax should be raised and returned to people in the form of a lump-sum transfer or some other tax cut/spending item that is the most efficient use of those revenues. But Paterson can't justify that. He's just using this as a ridiculous nanny-state cash grab.

But this doesn't even get to the core issue at hand, which is, Why are non-diet soft drinks so bad? They aren't bad in themselves. I assume that one consequence of non-diet soft drinks (obesity) is what he is claiming to be concerned with. But if obesity is what he's concerned with, then he needs to show the relationship between soft drinks and obesity and then the negative costs imposed on society from that soda-induced obesity. He doesn't have such evidence. Again, he's just looking for money in any way he can get it. Furthermore, why stop at soda? Why not tax ice cream? Or better yet, why not have people weigh in every year at a DMV and have their weights recorded? Then we can levy a true tax on obesity. Michael Jacobson would be so proud.

My recommendation: In lieu of a bailout, Gov. Paterson should request that the federal government give his state control of the Statue of Liberty. Then he could raise some revenue by selling it, which would be appropriate because after what he is proposing and what Mr. Nanny Bloomberg has done as mayor, it no longer belongs in New York.

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