The Truth about Trade
Dean is Chairman Emeritus of 'Truth About Trade & Technology, a nonprofit advocacy group led by a volunteer board of American farmers.
Taxing a weighty issue
Jun 10, 2010
By Bill Horan – Rockwell City, Iowa - Board member, Truth About Trade & Technology (www.truthabouttrade.org)
Politicians across America want to raise the cost of drinking. This year alone, they’ve called for new taxes on soda pop and other non-alcoholic beverages in at least 20 states and cities. There’s even talk about action on the federal level.
What’s behind this percolating movement? One motive is government’s insatiable thirst for revenue. Another is a desire to reduce obesity, especially among kids. They often work in cahoots: Let’s raise taxes to save the children, say advocates.
Yet raising taxes isn’t a good way to balance budgets or encourage healthier drinking habits. There is in fact a much better approach--one that avoids a tax hike and nudges consumers toward better habits while also preserving their freedom of choice.
Let’s start by pointing out that much of what fuels the drive for new taxes on soda-pop is a governmental money grab, plain and simple. The economy is rotten and politicians are trying to squeeze everything they can out of taxpayers. In the state of Washington, they’ve uncorked a new soda-pop tax: 2 cents on every 12 ounces purchased.
This may not sound like much. It’s a little more than a dime for a 2-liter bottle of Coke and a little less than a quarter for a 12-pack of Pepsi. But it does raise the cost of eating and drinking during the worst economy of our lives. Does this make sense?
Moreover, it would be a mistake to assume that the politicians will stop at a couple of pennies. Once they’ve established soda pop as a legitimate category of special taxation, they will raise its price whenever they stumble into a new budget crunch. No matter what the politicians promise, this should not be viewed as a one-time emergency measure. It’s a bold move to create a permanent stream of revenue for a government that refuses to confront its own profligacy.
In Colorado, politicians wiped out a 2.9 percent sales-tax exemption on soft drinks, also in the name of balancing the budget. Cities have been especially aggressive in pushing for soda-pop taxes: Philadelphia, San Francisco, and Washington, D.C. have debated proposals.
Many of these efforts have failed, but this has done nothing to deflate the hopes of would-be taxers. “How could you be discouraged when major cities and states all over the country are considering the idea?” asked Kelly Brownell, director of the Rudd Center for Food Policy and Obesity, in the Wall Street Journal. Last year, she authored an article for the New England Journal of Medicine that called for a federal soda tax.
Don’t discount that possibility. President Obama has spoken favorably about the idea of a special tax on food and drinks that use high-fructose corn syrup (HFCS) as an ingredient. The idea came up during the debate over health care. It wasn’t part of the final package, but it may receive fresh consideration as the law’s true costs become apparent.
Many of these tax proposals are disguised in the language of compassion for children. We have to raise taxes on soda pop, say many advocates, so that kids will quit growing fat from drinking it. But think about the fundamental contradiction: The tax raisers want to balance budgets via consumers who drink a lot of soda pop, while the nutritionists want to use taxes as a tool for reducing consumption of these same products.
There’s no way both groups can achieve their goals.
Robert Paarlberg of Wesleyan College--one of the most sensible voices in the arena of food policy--has proposed a worthy compromise. He suggests banning sugary drinks from food-stamp eligibility. Currently, the federal government spends about $58 billion on food stamps and roughly one in eight Americans receive them.
The beauty of this idea is that it would end a government subsidy and, in doing so, promote healthier drinking habits without trying to legislate them through tax policy.
Anybody who opposes this sensible idea probably isn’t serious about public deficits or childhood obesity.
Bill Horan grows corn, soybeans and grains in Northwest Iowa. This fourth generation family farm has been involved in specialty crop production and identity preservation for over 20 years. Mr. Horan volunteers as a Truth About Trade & Technology Board member