Filed Under: Uncategorized

Missing the Point in Mississippi, New Shenanigans in New York

There's no question that Mississippi has a serious obesity problem on its hands. It’s the fattest state in the union, with an obesity rate of 34.4 percent, according to the Centers for Disease Control and Prevention.

It's understandable that state legislators would be concerned about this. But all too often this concern has translated into wacky and wildly ineffective solutions. The latest is House Bill 414, sponsored by state Rep. John Mayo.

It's a pretty hefty tax. It would increase the cost of a 12-ounce can of soda by roughly 25 cents, and that's after the consumer absorbs the tax-adjusted higher cost of soft drink syrup.

Meanwhile, New York is back to its usual mischief, as we explain in our recent press release. Assemblyman Felix Ortiz, a rather notorious  Big Apple nanny, has introduced a bill that taxes anything classified as a sweet or snack by the USDA, which includes foods like granola bars and vegetable chips. The legislation also slaps a tax on sales of video games, rentals of video games, and pretty much everything else that’s enjoyable. The tax adds an extra 0.25 percent to the cost of these items.

These are what economists call Pigouvian taxes, meant to change behavior for the “betterment” of society. (You wonks out there should research economist Ronald Coase and the Coase Theorem for a solid refutation.)

Pigouvian taxes are intended to cause social change rather than act as revenue raisers. But they actually cause very little social change and inevitably end up being used as revenue raisers.

Let's consider soda taxes: A recent Duke University study found that even an enormous 40 percent soda tax would only decrease the average person’s daily dietary intake by just 12 calories.

Legislators often create wonderful-sounding "funds" into which these tax revenues go. See? We're not doing it for revenue. We're doing it to fight obesity and save the children. Revenue from New York's new tax on everything will be diverted into something called the “Childhood Obesity Prevention Fund.” But money is fungible. In reality, revenue previously used to fund anti-obesity efforts can be diverted to the general fund once tax revenue comes in.

A good example of this is the 1998 tobacco settlement, which required tobacco companies to pay states billions of dollars every year to reimburse the health costs of smoking. This money was intended to be spent on smoking prevention. But the General Accounting Office found that something very different happened. In 2004, just 17 percent of the funds went to health-related programs and only 2 percent was spent on smoking cessation. Most of the money was used to pay down state budget deficits.

The same thing does and will apply to food and drink taxes. Of course, our solution is for overweight people to burn more calories by eating less and exercising more. But we understand if Ortiz and Mayo disagree. When was the last time common sense made the government rich?

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