Cornell nutritionist Jennifer Wilkins writes in today's Albany Times Union that she asked her economist colleague, Professor Robert Frank, and was surprised by his answer:I asked my friend, Cornell economics professor Robert Frank, at a recent dinner party, what he thought of proposals to tax soda. I prepared myself to settle in, eyes glazed over, for some dense econ-speak about why it shouldn't be done and why it wouldn't work. Instead, I was surprised.
Without missing a beat and with a calm, matter of fact demeanor, Frank responded, "We have to tax something. It might as well be soda."
The beverage industry promotes statistics from polls saying that Americans don't want soda taxes, but the polls cited by the beverage industry never seem to ask participants what specific alternative tax increases or budget cuts they would prefer to a soda tax. The results of polls about soda taxes can be very different depending on how the questions are worded.
It's easy for New Yorkers to adapt to a soda tax. Soda is not a necessity, and if the cost becomes a burden, there are inexpensive substitutes readily available. Minor cutbacks in soda consumption are an easy way to hold down costs without forcing a drastic change in lifestyle. Property taxes, by contrast, are a heavy and inflexible burden on many taxpayers. It's difficult for taxpayers in the short run to do much to adjust to that burden without a major change in lifestyle. To a lesser extent, the same is true of increases in the broader-based sales and income taxes that Professor Mankiw advocates.
Although Harvard's Professor Mankiw apparently prefers a gas tax to a soda tax, I suspect that very few of those questioned in the beverage-industry-touted polls would agree--nor are New York's legislators (all of them up for reelection in the fall) likely to agree to pass increased gas taxes any time soon.
Professor Mankiw's colleague, Edward Glaeser, has warned that "All soda drinkers, even the rail-thin ones, suffer when soda consumption is either taxed or demonized."
The reality is that all taxes cause "suffering," and I don't think soda needs to be "demonized," but the net "suffering" imposed by a soda tax seems relatively small compared to the alternatives realistically available, given our dysfunctional legislature.
I acknowledge there could be implementation challenges, as Villanova Professor Maule has pointed out, but those seem to be surmountable. There's already considerable infrastructure in place for soda sold in bottles and cans.
Although a soda tax may not be a first-best solution, but we're far from in a first-best world, we're not likely to get there any time soon, and it strikes me as an experiment worth trying. If the alternative is closing state parks and public libraries, or laying off teachers, or raising our (already relatively high) broad-based taxes, a penny per ounce soda tax looks like a relatively less painful way to raise a billion dollars a year in revenue for a cash-strapped New York State.
A Quinnipiac poll conducted earlier this year suggests that a soda tax is a tax that has broad public support, when framed primarily as a revenue-raising measure. It's hard to imagine any other taxes would get the kind of public reception the Quinnipiac poll found.
Now it appears that tax lawyer Kelly Erb, who blogs as TaxGirl for Forbes, agrees with me. Earlier today, she blogged:
Realistically, to keep Philly schools open in any kind of worthwhile way – meaning, of course, that we actually have enough teachers and books to give our kids an education – funds are going to have to come from the City. The deadline for that commitment is almost here: Council must pass a budget by June 30.
There’s no money under any sofa cushions. And it’s pretty late in the game to talk other cuts. Mayor Nutter has suggested, and I think rightly so, that the alternative is to create revenue – in other words, tax more. Mayor Nutter has proposed two options: increasing property taxes or the imposition of a tax on soda and sugary drinks.
Property tax increases are pretty much a nonstarter in any municipality or state. Interestingly, Philadelphia is a relatively low property tax city to begin with, especially as compared to our suburban neighbors in southeastern Pennsylvania and New Jersey, but an increase would be politically difficult.
A soda tax has a better chance of passing because of what it represents: it’s killing us (or so they say). And that makes it evil. And thus, taxable.
Mayor Nutter proposed a similar tax on soda last year that failed. At the time, the tax was pitched as an anti-obesity measure. Studies have subsequently shown that combating obesity by increasing taxes on sodas and sugary drinks could only happen if the tax increases were big. Economist Roland Sturm said about that study:
Small taxes will not prevent obesity.
But the bigger the taxes, the more it disproportionately affects the poor and the middle class, right?
That’s what Harold Honickman, owner of the Canada Dry Delaware Valley Bottling Co. in Pennsauken, told reporters, claiming:
The problem is it’s a discriminatory tax against the poor and the middle class.
Oh Mr. Honickman. Goodness knows I love me some Canada Dry but this isn’t about discrimination. It’s not a targeted hit on the middle class. It’s a tax on soda. Let’s keep this in perspective.
I’m not a fan of sin taxes. I think taxes focused on specific products are silly and quite frankly, judgmental. What I think constitutes bad behavior and what you think may be very different. I worry about where we draw the line… What’s next? Video games? Coffee (note to legislators: don’t even consider this one or there could be serious problems)? Candy?
But in this case, I’m also not a fan of an uneducated population. Something has to give.
The bottom line: although Kelly and I agree that there's not much statistical evidence that taxing soda will decrease consumption, it will certainly increase tax revenue and it does seem to be one of the few potentially politically viable (dare I say--politically palatable?) sources of tax revenue left.
As for the effect on the poor, the Pennsylvania Department of Revenue says that sales tax may not be charged on items purchased with food stamps, so apparently imposing a sales tax on soda would not affect low income folks on food stamps.
Of course, that begs the question as to whether the laws should change to prohibit the use of food stamps for soda purchases, as New York City Mayor Bloomberg has proposed. I imagine THAT policy change might have a much bigger effect on soda consumption than taxing it would, given that one-seventh of the population currently receives food stamps.