The Long Run Effect of Sin Taxes on Responsibility

September 28, 2012

I ran across an article on soda taxes yesterday that I think is indicative of a very disconcerting trend in tax policy but might be an even more disconcerting trend in the evolution of the American psyche. Much of the article is dedicated to convincing the reader that soda consumption is a contributing factor to obesity (I’ve addressed many of these errant logical leaps in other places). For now, I am most interested in the author’s disturbing prediction for the future state of affairs of U.S. nutrition policy:

"For much of the twentieth century, nearly ubiquitous cigarette advertisements encouraged smoking through both overt and subliminal gimmickry. Eventually, as scientific data established a clear correlation between smoking and lung cancer, the regulatory landscape shifted towards discouraging smoking. With each new anti-smoking intervention, critics wailed about government infringement on the rights of the individual. Yet these measures have sharply reduced the number of smokers and led to a declining incidence of lung cancer, with little obvious downside and few complaints. Years from now, I suspect that obesity interventions will be viewed with the same nonchalance."

It’s great that people will live longer, healthier lives, but I’m not sure why that means that tax and regulatory schemes are the most appropriate way to guide us toward “more rational” or “healthier” choices. Ignore for a moment the fact that broad health ideals are moving targets and government recommendations are often informed by special interests. I’m more bothered by the prospect that government intervention will shift our preferences away from activities that may be totally within our risk tolerance.

A 2006 National Bureau of Economic Research study by Kip Viscusi found that the barrage of anti-smoking sentiment (and punitive state excise taxes) has actually overly distorted individual calculations of risk and reward. Believe it or not, most smokers actually over-estimate the risk of smoking—but still choose to do it. This observation lends credence to the idea that consumers get some value from smoking, whether it be social, chemical, etc. Tax and regulatory measures are attempting to skew what is otherwise a personal calculation of risk and reward.

While cigarettes are generally thought to be worse for your health than a soda, the logic is the same here. Life is about balancing expected risks with expected benefits. More romantically, there are things that are good for the body and things that are good for the soul. The situations where we have to choose between the two are the spice of life.

This long term trend of abdicating our responsibility to watch what we put into our bodies has the potential to lull us into a false sense of food safety. My experience has been that people's bodies are different and their diets can be too. There is a lot of tacit knowledge that goes into crafting our daily diet, and tax policy and regulatory regimes are crude tools to attempt to make us healthier by.

More on tobacco taxes here.

More on soda taxes here.

Follow Scott Drenkard on Twitter @ScottDrenkard.

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