Taxes Make Dull Tools


If you don't drink soda, it's of little concern that taxes are being proposed to limit consumption of sugary drinks, just as those of us who are nonsmokers don't give much thought to punitive taxes aimed at discouraging tobacco use.

Yet, the question raised by these and a raft of socially-targeted taxes is whether they unfairly discriminate against people who don't happen to have a lot of money. Put another way: Is it reasonable for government to try to alter behavior by placing a price on it?

In Massachusetts, the debate centers on a proposed tax for soda and candy that would bring the state as much as $50 million a year. The tax wouldn't be new, the argument goes, since the proposal involves removing the exemption on certain sweets rather than applying a new and targeted tax.

But in nearby New York State there is excitement in some quarters about the prospect of "raising $222 million a year" (that's the headline), by imposing a half-cent per ounce tax uniquely aimed at curbing consumption of soda.

Who exactly would be discouraged by having to spend a few pennies more for soda pop? Certainly not rich folks. Why would anyone willing to pay, say, $12 for glass of fairly mundane merlot at the bar, think twice about spending 81 cents for a can of Pepsi at the convenience store?

Punitive taxes can only modify the behavior of those for whom the tax is truly punitive.

Historically, "sin taxes" - primarily on tobacco, alcohol and gambling - were implemented to cash in on socially risky behavior rather than to curb it. The US has taxed cigarettes since the Civil War but only in recent years, with the federal tax climbing above a dollar a pack, has it been viewed as a serious attempt to discourage consumption. Even then, does anyone truly believe that if President Obama succeeds in kicking his cigarette habit it will be due in any way whatsoever to the tax on a pack?

In California, an example of how twisted things can become when government tries to affect both behavior and revenue is seen in the handling of highway carpool lanes, sometimes called High Occupancy Vehicle lanes. The original premise was both wise and democratic: encourage motorists to reduce congestion and pollution by sharing rides, and reward them with their own speedy lane. But now, lawmakers eager to raise money are amending the rules for HOV lanes by opening them to unaccompanied motorists willing to pay a fee.

The practical effect is that the state will make money, the average motorist without a companion and unable to afford the tariff will take longer to get to work, and the Ferraris will fly by solo.

It's said that the Massachusetts soda tax will be used to support health care programs, while also discouraging consumption of drinks that contribute to obesity. That's a zero-sum proposition. If the tax actually succeeds in reducing soda sales, the revenue will dwindle as well.

In all likelihood a few cents in taxes won't significantly affect either sales or obesity. It will provide the state with additional revenue, and it will create another small hardship for those least able to afford it.

If government really wants to promote healthy behavior, conserve water, reduce pollution, or promote other good causes, it should create the necessary programs and provide the proper incentives. On the other hand, if government needs money, it should collect it without dubious pretense.

© Peter Funt. This column first appeared in The Monterey Herald.

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