Monday, March 15, 2010

Soda Taxation Frustration

Mayor Bloomberg and Governor Paterson have erred in pushing for a "soda tax" in New York. The plan to tax non-diet soda at 1 cent per fluid ounce is both regressive and illogical.

Regressive Taxation . . . Again?

We have been very critical of Mayor Bloomberg's love of regressive taxes. In 2009, the Mayor relied on regressive taxes to close his budget gap.
Regressive taxes should be avoided. By asking those with the lowest incomes to pay more of their income in taxes than those with the highest income, we increase inequality, punish poverty, dampen spirits, and promote social ills. We also lose moral authority. For privileged people to demand more of those with lesser privilege than they do of themselves creates an impression of reverse-Robin Hood politics - shifting wealth and income from poorer individuals to wealthier individuals based on a belief that wealthier people will make better use of the wealth being shifted. Mayor Bloomberg, as a multi-billionaire, may hold a view that wealthier people should have greater wealth than they do today and that poorer people should have less, but such a position is political untenable, morally repugnant, and contrary to basic principals of macroeconomics. When poorer people obtain additional wealth, they increase demand in the economy, which creates jobs and increases profits for businesses. Wealthier people are more like to save or invest additional cash - activities that are not unhealthy but that cannot create the level of economic growth that consumer spending does.

Ironically, the Mayor is supporting Governor Paterson in this regressive soda taxation effort. Paterson is likely the most progressive Governor in the history of our state, but he seems to be willing to ask the poor to fund his budget gap because the gap is so large. He should find another way.

A soda tax would take a far larger share of income from poor and low income New Yorkers than from those more fortunate. It is a classic regressive tax, and unlike cigarette taxes, it cannot successfully be defended on the basis of a claim that soda consumption is uniquely dangerous or unhealthy.


Advocates for the soda tax have attempted to justify it as a health measure, but making such claims undermines the credibility of the advocates.

Soda is singled out for taxation on the basis of its contribution to obesity, but candy bars, cakes, cookies, pies, and ice cream would not be affected. Can anyone argue that we should encourage New Yorkers to eat more candy bars and ice cream but drink less non-diet soda as our strategy for reducing obesity in New York? Even amongst drinks, soda is not the worst offender. Soda and orange juice have approximately the same amount of sugar. Grape juice has 70% more sugar than soda. If it is sugar consumption which we want to reduce, we should tax grape juice as well as candy bars and ice cream before we go after soda.

Also, obesity is a result of excess calories and a lack of exercise. We could subsidize exercise, tax calorie consumption, or tax excess weight itself of we want to encourage healthier behavior. Perhaps the Governor should set up weigh stations for people; if people are found to have lost weight based on voluntary official state-sponsored weigh-ins, they should be eligible for a tax credit.

The search for additional government revenues should focus elsewhere. Soda is not the source of our problems, and it shouldn't become our whipping boy.

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