The New York Daily News provides a link to a Youtube video made by New York State Health Commissioner Richard Daines who makes a five-minute video arguing for a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on non-diet soda.
You can tell that Daines and those in Albany who designed this stupid policy have very little understanding of Pigouvian taxA Pigouvian tax, named after 1920 British economist Arthur C. Pigou, is a tax on a market transaction that creates a negative externality, or an additional cost, borne by individuals not directly involved in the transaction. Examples include tobacco taxes, sugar taxes, and carbon taxes. ation in the first place because he is promoting an ad valorem tax on soft drinks as opposed to a per-unit tax. If the sugary content of soda is what is bad, then shouldn’t the tax be based upon the sugary content and not the price? If I buy a Sam’s Choice Cola instead of Pepsi or Coca-Cola, why should I pay more tax on the Pepsi/Coke compared to the Sam’s Choice. Both essentially contribute the same to obesity.
I oppose the policy, but could have written a better nanny policy that more effectively limited obesity.
Here’s what should be the proper tax policy with regards to soft drinks:
The tax should be set to offset the true negative costs imposed on others in society from the soda’s consumption, and supporters should justify the tax with numbers on what is the true external cost. Merely citing the total economic cost of something is not providing any relevant information on optimal Pigouvian taxation. Everything has an economic cost, but not everything has a substantial external cost imposed on third parties.
Daines claims that you should not say no to this policy just because there are other unhealthy activities that won’t be taxed. But by taking this position, Daines is not getting to the core of the problem. He assumes a link between soda and obesity and says we need to tax soda to offset obesity. But why not go straight at the problem? That’s the problem I have with folks like Daines. They are totally dishonest when they start with proposing the taxation of just one product (soda) that they claim is a source of some other problem (obesity).
Advocates of raising the federal gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. like Greg Mankiw are at least honest when they tell you that they would prefer a carbon taxA carbon tax is levied on the carbon content of fossil fuels. The term can also refer to taxing other types of greenhouse gas emissions, such as methane. A carbon tax puts a price on those emissions to encourage consumers, businesses, and governments to produce less of them. , which goes more directly at the source of greenhouse gas emissions. But if you asked Daines whether he would support a policy of taxing individuals based upon their BMIs, thereby targeting the “problem” at its core, I doubt he’d give you an honest answer.
That’s the main difference between economists who understand Pigouvian taxation and its ability to improve societal well-being and public health nannies like Daines who have other agendas and have little understanding of sound tax policy. (See also the blog post below this one that has a similar problem that we can continue to see — setting a cigarette tax rate to raise revenue as opposed to offsetting the negative costs imposed on others.)Share