The Governor of NY had an idea of how to raise funds while ostensibly providing a health benefit to the citizenry. He proposed putting an 18% tax on sodas and all other sweetened drinks. "Studies show" that there is a link between soda and sweet drink consumption and obesity. [Just an interesting side note: studies also show that there is a high correlation between obesity and lack of physical movement--couch potatoes are fatter than those who are physically active. So of course it makes sense that school boards across the country have for many years been shortening or doing away with recess time during school hours, and have shortened the number of times a week that students get physical education classes.] The legislature turned down the proposal.
Yesterday no less than our President was floating the same idea, only with the intention of doing this nationally, connected to the new health plan that our government is wrestling with. It was also reported that some of the most vocal proponents of the new health plan stepped away quickly from this idea and said "No way!"
If we learned nothing else from Prohibition then we should have learned that government interference in the consumption of legal products results in chaos and crime. And this is not alcohol and tobacco that is being talked about: it's Coke and lemonade and iced tea and fruit punch and ALL sweetened drinks. So if grape juice has sugar in it then it, too, would get the tax? And here's a question: are products like Coke Zero or any of the other diet sodas and drinks which don't use sugar as a sweetener then going to be exempt from the additional tax? What about "natural" products that are naturally higher in sugar, like orange juice?
I understand the government's having concerns about the health of the country's citizens. But shouldn't education be their front line weapon? Develop a module for the country's schools about the "evil" of sweetened drinks and the possible health affects. And for heavens sake stop selling those same sodas and sweetened drinks inside of schools if you are really so worried!
What's going to be next? A proposed 27% tax on all bakery goods? A 22% tax on cake mixes? A 30% tax on chocolate bars? The amount of sugar in those products is far higher than in the drinks. And if we are going to tax sugar out of existence, can salt and fat be far behind?
Yes, I realize the government needs money in order to function. Yes, it has expenses. Yes, it does provide services for its citizenry, services that have to be paid for. But could that government please stop treating us like congenital idiots and stop supposing that we won't see through something that would be obvious to a vision impaired person?! An 18% tax on sweet drinks has very little to do with health concerns and an awful lot to do with revenue sources.
Please note: I am not a proponent of loading ourselves up with excess sugar. I am also not a proponent of loading ourselves up with excess taxes. You know how we are all complaining about how yeshivas are usurping our roles as parents? I don't like it any better when the government plays "Big Brother" or "Big Father."
A political posting on this blog? Did you make a shecheyanu?!
I think such an 18% tax would be disastrous from a financial point of view and would give our sluggish economy a hit it doesn't need right now. Our President doesn't seem to have a real clear grasp of economics and hasn't looked at the bigger picture. I wish he'd stop floating ideas off the top of his head without running them by people who have real knowledge about all the affects.
"Just an interesting side note: studies also show that there is a high correlation between obesity and lack of physical movement"
you should have placed this at the end of the post. after reading this sentence i decided to give up reading blogs. now i'll never know what you wrote in the rest of the post.
(or does typing count as physical movement in the obesity context?)
I agree. We should get rid of government involvement and interference in the market for sweetened-beverages.
Then the cost of Cokes & other "sugar" drinks will rise to match the rising cost of high fructose corn syrup. Or maybe it would even pay to use "real" sugar.
Right now, the government is heavily subsidizing this industry. That is why sodas are so cheap.
We don't need more taxes. We need to stop giving a hand to the production of these beverages in the first place.
Tuvi - I wish he'd stop floating ideas off the top of his head without running them by people who have real knowledge about all the affects.
Every word Obama says is run by a huge staff of people, from the COS and the speechwriter(s) down.
Now whether of not that staff has any real knowledege is the question here. :-(
Offwinger, this is the first I'm hearing that the government subsidizes the soda producers. In what way? Their prices really aren't that cheap and in fact have risen steeply in the last couple of years. It's only water and a bit of flavorings--what is there to subsidize?
The government heavily subsidizes corn. The sweetener in regular soda (as opposed to diet) is high fructose corn syrup, which is a corn derivative. Thus, the government is making the cost of soda cheaper for manufacturers by paying farmers to grow more corn.
As for what is "cheap," without even getting into the high profit margin on soda sold from a fountain, compare what it costs in the store if you buy:
(a) 64 oz. of soda;
(b) 64 oz. of milk; or
(c) 64 oz. of juice.
Soda is pretty cheap.
But Offwinger, that farmer's subsidy isn't primarily for the soda market--it's for the fuel market. The soda manufacturer's are just riding the coattails of the push towards ethanol.
Regular price for the soda in the two liter bottles is betwen $1.59 and 1.79 in the local supermarkets. We got orange juice last week at 2 for $4. The market brand on a half gallon of regular milk is $1.99 regular price. Sure there is a difference but not all that much of a difference. None of them are cheap.
There are multiple ways our government subsidizes corn and derivative products. Most insidious is the tariff on imported sugar (which is so dirt cheap in Brazil that they make a huge amount of their sugar into ethanol to run their vehicles there). This tariff is almost entirely political in nature being pushed by my representatives here in Florida to "protect" the local sugar industry. Ironically, many here would prefer to eliminate the local sugar industry due to the environmental damage it causes.
OJ is 2 for $4 on sale & 2 for $5 on sale for "premium." Soda is routinely on sale for 99 cents or $1.09 for a 2 liter bottle. So let's not compare apples to oranges when it comes to how much you can regularly pay. Hehe.
Milk varies a lot regionally due to other government policies, so I won't get into it, other than to note that it is typically 50% to 150% more expensive.
(Mark is also right about sugar as a separate matter.)
If you subsidize corn, but tax soda, you're basically incentivizing the use of corn for only certain purposes.
If you sell soda, you have a couple of options. You can lower your price on soda, thus eating the tax yourself, and reducing your profit margin. For most fast-food places, this is a big problem, b/c they set their prices to break even on food, and make all their money off of soda. If they choose this route, they will have to raise their prices on the food.
Alternatively, they can make the cups smaller and charge the same amount. Assuming they charge the same for diet and non-diet soda, they will make more money from diet than non-diet.
The net result will be people consuming somewhat less soda, and the government making money both from the tax and the health benefits. While I don't love the tax in principle, the net results don't seem too awful. Not something I'm going to fight about.
I wouldn't fight about it either, rejewvenator. In fact, I'm not opposed to taxing things that produce costs on the rest of society, and there does seem to be a building amount of evidence suggesting that society does already pick up the tab of health care costs related to unhealthy eating (this is without even getting into future health care possibilities).
I posted my comment, because I thought the "government shouldn't play big brother" aspect of this post was ignoring a critical aspect of gov't involvement in this market! My reaction to this post was the same way I feel when I read comments saying "Government better not touch my Medicare."
Prof K's posts tend to be fairly thorough and well-researched, so I figured this was just an oversight. This post fell short in terms of rigor of analysis. Reasonable people can disagree on the politics, but you can't leave out key details of what's already happening.
Er, thanks for the compliment sort of I think. Re the "economic realities," I focused on the Big Brotherism because that is the tack the government was taking. Taxing the soda was going to be strictly a health related issue for it, or so the government is telling us. The definitive studies which might show us the direct health care costs of obesity, and specifically obesity caused by ingestion of excess sugar/corn syrup laden drinks, are still not complete, and yes (what else is new) there are conflicting studies. However, what we do have are the studies, hundreds and thousands of them, that show the health care and societal costs of alcohol. You want to tax something and get a health benefit to society at the same time? Put that 18% tax on every alcoholic drink sold in a bar, every container of alcohol that is sold. Prohibition didn't work but taxation might do it. And if you argue that the taxation wouldn't work and people would be up in arms, that same argument can be made about soda and sweet drinks.
The "economic realities" I was pointing out in my original comment (rather than the discussion that followed) isn't about the cost of obesity or health care or anything.
It was about how the government is already subsidizing soda in the first place. THAT is the Big Brother aspect that was omitted in the OP, and I believe a critical fact to have mentioned. Big Brother is already here, even prior to the proposed tax.
Not to quibble over semantics, but the government subsidy of corn producers doesn't fall under the common definition or usage of Big Brotherism. Big Brotherism has a highly negative connotation, with elements of a lack of freedom of choice. In order for that subsidy to be called Big Brotherism, the subsidy would have had to have been forced upon the corn growers. They would have had no say about growing that corn.They would have been told that you need to grow corn for your own good and for the good of our country, and if you disagree, well tough nuggies.
The opposite seems to be true. Generally farmers welcome the subsidies, since farming is highly labor intensive with a relatively small profit margin if there are no subsidies. At the same time that the government gives the subsidies to the farmers, it also warrants that someone will be buying the product grown. And, when there is too much supply of a particular commodity, our government has been known to pay farmers NOT to grow certain crops. Government involved in regulating crop growing? Yes, but not Big Brotherism.
When I lived in Oregon one of our tenants was a couple from Idaho. He was in medical school. How was he paying the tuition? He, his two married brothers, his parents, and his in-laws were all being paid to NOT grow potatoes. Trust me, they weren't calling the government Big Brother--probably more like Santa Claus and the Tooth Fairy all rolled into one.
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