December 19, 2008

New York's "Soda Pop" Tax Proposal

New York Governor David Paterson unveiled his budget proposal this week, and one proposed tax hike is drawing a lot of attention: a plan to introduce a new tax on sales of soda pop. The 18 percent tax-- which would be on top of the existing state/local sales tax, generally about 8 percent-- would also apply to sugary juice drinks.

Paterson clearly thinks this is a good idea because it's supposed to raise half a billion dollars a year. Nicholas Kristof thinks it's a fantastic idea, but for an entirely different reason: he thinks it will get people to stop drinking so much soda. Kristof goes so far as to call it "a landmark effort that, if other states follow, could help make us healthier."

With no apparent irony, the New York Times reports that
State officials projected that the tax would raise $404 million in the fiscal year that starts in April, and $539 million in the following fiscal year, but said the proposal was primarily a public health measure.
Of course, if the yield of the tax goes up, that means that people are drinking more sugary sodas, not less. So this thing is either going to be a budgetary savior for the state, or it's going to make people healthier by encouraging them to spend less on soda pop. You can't have it both ways.

So what's the real answer? The Times' Clyde Haberman has a clear-eyed view:
Make no mistake, the last thing that government wants is for everyone, right this minute, to stop smoking, boozing, gambling and downing those nutritionally empty supersweet sodas. Too much money is at stake. By absolutely no coincidence, the New Yorkers who pay these particular taxes tend to be those who can afford them the least. Poor people spend disproportionately on smokes, booze and unhealthy soft drinks, not to mention on the prayer that God will drop everything else and shower lottery millions on them.
These are “habits that are more common among those who have the least amount of political power,” said Andrea Batista Schlesinger, executive director of the Drum Major Institute for Public Policy, a liberal but nonpartisan research center in New York. “To do something in the most politically efficient way is to tax or hike the fees of those who have the least power,” she said.
Folks like Kristof aren't wrong to want to discourage people from doing self-destructive things. But they're absolutely wrong to think that lawmakers' motive in proposing things like the soft drink tax is to improve public health. They're doing it because it's politically easier than the true tax reforms that could help keep New York's budget balanced years down the road.


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