Sin Taxes: An Opposing Viewpoint

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I came across an article that expresses an interesting take on “sin taxes.”

Proponents of sin taxes (taxes on cigarettes, alcohol, soda, fatty foods, etc.) talk about public health benefits, but isn’t that still about money at the core?  What I mean is, sick people run up big hospital bills, some paid by taxpayers through government services and some paid by the public in the form of higher insurance costs.  If we can encourage people to avoid harmful foods and substances, then we can (according to sin tax proponents) reduce public health costs.  Right?

Not so fast, says David Callahan with Huffington Post.  If sin taxes are all about money, then the whole concept is flawed.  The analysis is simple: most people who abuse their bodies die more quickly.  They need medical care like anybody else, but presumably for a shorter fraction of their lives.  It’s the “healthy” people who incur higher medical costs in the long run as their bodies slowly break down during old age.

The analysis is simple, but it’s the conclusion that gets tricky.  Callahan is not suggesting that sin taxes are pointless because they can result in a healthier population, which can result in higher medical costs in the long term.  That’s just a little macabre — he’s not saying that.  He’s saying that the effects of sin taxes are inconclusive and need to be studied more, that’s all.  And until there is conclusive evidence that they are effective, we should probably stand in favor of tax relief.

The Nutella Tax

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If you’re like me, part of the appeal of traveling and visiting new places is the FOOD. And vacationing in Europe is expensive enough as it is, but by the time I get a chance to visit, all I’m going to be able to afford to eat is baguettes and water.

The latest food item on the chopping block in Europe is palm oil — a critical ingredient in France’s beloved Nutella. If you haven’t tried it, Nutella is a sweet, chocolatey hazelnut spread that is produced in Italy but consumed primarily in France. The so-called “Nutella Tax,” if approved, would result in a quadrupling of the tax on Nutella and other products containing palm oil. The Nutella company has vowed not to change the ingredients, so the increased cost of production would no doubt have to be passed on to consumers. What the world needs now is tax relief, not nitpicky sin taxes that do little to change behavior!

My tax attorney alter ego in France is blogging right now about how his next trip to the States won’t be the same if he can’t pick up a package of Twinkies while he’s here.



Bullet Tax?

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If Cook County board president, Toni Preckwinkle, has her way, it’s going to be more expensive to buy bullets in Chicago.  She is pushing for a $.05 per bullet tax to take effect as a means of curbing violent crime in a city that has tallied 409 homicides so far this year.  And there’s also the bonus of raising about $1 million per year for county coffers.  Yet our governments continue to burden citizens with additional tax responsibilities when the need for tax relief is greater than ever.

We’ve discussed sin taxes before: the cigarette tax, Denmark’s short-lived tax on fatty foods (the so-called “fat tax“), the soda tax controversy in New York and the bay area of Northern California.  The problem is these taxes typically cause an unfair burden on those who use these things responsibly (although I’m not sure it’s possible to smoke cigarettes responsibly) and they fail to really control the “bad behavior.”

And this is not just the tax attorney talking; the same problems have been identified by opponents of the bullet tax.  Won’t people go to neighboring counties to buy their ammo?  Won’t this infringe on the rights of lawful gun owners?  Why should law abiding citizens have to pay for the county’s budget shortcomings?

Denmark's "Fat Tax" is Losing Support


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I was sad to learn that the Danish government is second guessing the “fat tax” that just made it on the books last October.  They are finding that Danes are crossing the border for tax relief.  They are crossing into neighboring countries (Germany, Holland, or Sweden) to make their high-fat food purchases, which is causing serious financial harm to Danish businesses.  I guess this means the Danes won’t be taxing foods with high sugar content either as they had planned to do previously.  They had such high hopes only a year ago.

The issue of whether or not “sin taxes” produce the desired effect is a hot one; experts do not agree.  Denmark certainly would have been an interesting test case.  But repealing the fat tax after only one year isn’t going to tell us anything definitive.  I won’t lie, it was also kind of nice that we were able to observe how this might have played out from a distance (without subjecting ourselves to such an awful tax).  The tax attorneys at our firm are united in our steadfast opposition to any tax that would make junk food more expensive.

AMA Supports Soda Tax, On One Condition

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While there is no silver bullet that will alone reverse the meteoric rise of obesity, there are many things we can do to fight this epidemic and improve the health of our nation.  Improved consumer education on the adverse health effects of excessive consumption of beverages containing added sweeteners should be a key part of any multifaceted campaign to combat obesity.

Where taxes are implemented on sugar-sweetened beverages, using revenue for anti-obesity programs and educational campaigns explaining the adverse effects of excessive consumption of these beverages will help to reduce the consumption of these caloric beverages and improve public health.

~ Dr. Alexander Ding, AMA board member

Its clear from this statement that the AMA is not fully embracing a soda tax.  The emphasis should be on educating the public about the health risks of chugging sugary soda day after day, and the benefits of replacing soda with water.

The AMA is saying that a soda tax may be effective as part of a comprehensive plan to reduce obesity in our nation, and it would not go very far on its own.  Also, if Dr. Ding’s statement is representative of the AMA’s position, the focus is not on whether or not a soda tax should be implemented, but what to do with the funds should that be the case.  Nobody believes that a soda tax would curb consumption to the point that we no longer have a problem with sugar and obesity.  The real value in a soda tax would be the projects and programs that could be funded if the money is spent responsibly.


The Soda Tax

It doesn’t rank all that high on our list of tax problems.  Maybe you don’t even know you’re paying it.  But at least 35 states already impose taxes on sugar-sweetened sodas.  Soda is believed to be one of the reasons we’re so fat here in the United States.

Tu can eat todos los donuts you quiero, pero tu better not wash it dowño con un 16oz beveragado!

~ Miguel Bloombito (via Twitter)

Until now, the American Medical Association (AMA) hasn’t taken any official position in the soda tax debate.  However, they are expected to put it to a vote this week at their annual meeting in Chicago.  Is there even any question which side they will take on the issue?  My mom never let me eat dessert before dinner, and I don’t think the AMA would pass up an opportunity to take a stand against soda.

If a soda tax is effective, it won’t be in its direct deterrence of soda drinkers.  At a rate of one or two cents per ounce, it would hardly make a difference to most soda addicts.  The effectiveness of a soda tax depends on how soda tax revenue is spent.  If the revenue is spent on programs aimed at curbing obesity, then it could make a significant difference.

One particular obesity program that I think makes sense involves improving access to good cold drinking water at schools and in public places.  Sometimes people are just thirsty and need something cold to drink.  If you put soda in front of them, they’ll drink it.  But if there’s water, they’ll drink that too.  Why is it that public water fountains (the kind typically found in schools and parks) usually produce either warm water or none at all.  And when they do work, the water pressure is normally so weak that you can get little more than a sip.  We should have the technology to build high-quality water fountains these days; ones that actually work.  And maybe a soda tax could help fund this sort of thing.

Denmark’s “Fat Tax”

It’s bad enough that the tastiest foods are always so bad for you, now in Denmark they are getting more expensive too.

Beginning October 1st Denmark initiated it’s new “fat tax,” which increases the price of certain foods by 16 krone (about $3) per kilo of saturated fat. It is expected to have a substantial impact on the price of everyday staples such as milk, cheese, bacon, and butter. The Danish (the people and the pastry) are not thrilled. These traditional goodies are said to be made with generous amounts of butter:

Although the government approved the tax by an overwhelming majority, the people of Denmark and others have made the following arguments in opposition to the tax:

  1. Negative impact on organic dairy farmers
  2. No distinction in the law between fat in whole foods, processed foods, or even fast food
  3. The government passed the tax to increase revenue, not to improve the health of the Danish
  4. May have unintended consequence of driving people to purchase cheaper, less healthful foods
  5. A fat tax should focus on cutting trans fats, not saturated fats
  6. Many people will still eat the same things they ate before the tax
I guess the upside is that tax relief and weight relief will now come in the same package.