1. The Road To Hell Is Paved With Good Intentions -- Philadelphia Edition!
Nearly two years ago, Philadelphia passed a "soda tax" -- a hefty 1.5 cents per ounce or $1 tax on a typical two-liter bottle -- as a "sin tax" in the national war on obesity. Now the verdict is in.
2. Philadelphians didn’t cut calories as a result of the tax on sweetened drinks, nor did they shift towards drinking anything healthier. Instead, most of them just drove outside the city to buy the same old sodas from stores where they didn’t have to pay the tax.
3. Meanwhile the poorest in the city — those who would find it hardest to drive for many miles to buy soda — just ended up paying more in taxes.
4. “We find no significant reduction in calorie and sugar intake,” conclude researchers Stephan Seiler from Stanford University, Anna Tuchman from Northwestern and Song Yao from the University of Minnesota, in a study published this week.
5. Quote from the study: "The tax does not lead to a shift in consumption towards healthier products, it affects low income households more severely, and it is limited in its ability to raise revenue."
6. As the obesity epidemic effects the poor disproportionately, they say, the tax “imposes a relatively larger financial burden on low income/high obesity households that are less likely to engage in cross-shopping at stores outside of the city.”
7. They also note that this dismal outcome is wildly at odds with earlier, optimistic economic forecasts about how such soda taxes would fare.
8. A variety of economists, using spreadsheets and theoretical economic models, predicted that taxing sugared drinks would lead to sharp falls in the amount of them that are drunk, especially by the poor.
9. “Compared to the decrease of 51,000 ounces of taxed beverages at the average store in Philadelphia, we find an even larger increase of 61,000 ounces (per store) in stores up to 2 miles away from the city,” the researchers found.
10. Apparently, none of this was accurately forecast using economic models. A tax designed to improve health of the poor does no such thing, but instead just ends up enriching the city coffers by further impoverishing the very poor it was allegedly intended to help.
Oh my God! This soda tax fiasco in Philadelphia is even worse than what I thought. See this thread for additional color on this.
There has been excellent dialogue generated by this thread. It is gratifying to see some people actually changing their views on "sin taxes" based on this evidence. Many have drawn the logical conclusion that for it to be effective a "sin tax" has to be state/nationwide. 1/
Personally, I find numerous problems with "sin taxes" whether they be local, statewide, or nationwide. 2/
For one thing, they set up a perverse conflict of interest between the state and the citizens. Good intentions aside, legislators rarely, if ever, plan on having zero revenue from sin taxes in future years (even as that would be the case if the taxes worked as advertised). 3/
In most cases, legislators bake the tax revenues into their forecasts and start spending them. As the revenue stream dwindles, they find other ways to make up the shortfall, or resort to deficit financing. Either way, "sin tax" turns out to be a canard to raise tax revenues. 4/
Do you know that the cigarettes that are confiscated by New York State (to stop illicit cross-border trade in cigarettes, instigated by high taxes on cigarettes) are not destroyed, but sold by the state through the backdoor to raise revenue for the state? Some "sin tax," huh! 5/
So all things considered, where do I come out on "sin taxes." My considered view is this: Government should be in the education business so far health care issues are concerned. 6/
Government should not do a perfunctory job of educating, but a very thorough job, by deploying impartial and best scientific evidence available, and by deploying the best authorities in the field to stake their personal reputations in bringing the best information to people. 7/
Government should also get out of the tax incentives/punishment based behavior modification business altogether to avoid a paternalistic and/or adversarial relationship with citizens. 8/
Government should always raise the revenue it needs through broad based taxation, and never through narrowly targeted venues, which are always open to mischief one way or another, for legislators and citizens alike. No need to create temptation. 9/x