Sin taxes, static models and budget.

Aug 17th, 2012 | By | Category: Budget, Politics-General

The City of Richmond, CA. may be about to pass a first-in-the-country sin tax, on Soda.  In November the citizens will decide whether or not the city will levy a 1 cent per ounce on sugar sweetened drinks within the city limits.  The nanny-government types think this is marvelous for obvious reasons.  The city believes they might get as much as $3 million on the deal.  They can’t both be right.

Estimates of this nature assume a static model, that is the population under review will continue to act as they did before the tax was assessed.  Trouble is, it doesn’t usually happen.  If you tax an activity it will tend to decrease.  I grant you than an extra 16 cents on one McDonald’s lunch may not be a big deal.  If you have a family of four or five, and you don’t have a lot of money, maybe it is.  If you are going to buy a couple of 12-packs, or maybe a few two-liter bottles, maybe you will do your shopping across the city line.

Is this a public health issue?  Is it tax policy?  Is it both.  The Health Nazis are thrilled the money will be available for programs to fight childhood obesity.  Trouble is, there is nothing in the plan that directs the funds to those purposes.

It will be interesting to see how this goes.  If it passes, it won’t be the only place it will happen.

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3 Comments to “Sin taxes, static models and budget.”

  1. Gadfly says:

    Richmond’s soda-tax initiative reinforces the notion that “the Road to Hell is paved with good intentions.” Taxing something in order to force a population to change its behavior indeed forces a population to change its behavior: It is called the Black Market. Has the taxation on tobacco really forced most folks to quit smoking? Not that I have observed. But thefts of cartons of cigarettes certainly became prevalent when businesses were forced to raise prices on tobacco products to satisfy government taxation policies.

    Well-intended or not, Richmond’s get-rich-quick scheme will fizzle, and have unintended consequences long term that will most likely result in more regressive taxation in the future. I doubt law enforcement will be dealing with soda runs, like they do with beer and cigarettes. But who knows?

    Pssssssst! Hey mister, look over here in my trunk. Ten bucks and I’ll give you a 16-ouncer with ice and a lid.

    • Bob Walsh says:

      At one time in our past there was a point in taxing what the government considered to be bad conduct. In the pre-OSHA days there were both phosphorus and sulfur based matches being produced. The phosphorus based matches were cheaper, but were poisoning the women and young girls who made and sold them. The government increased the tax on phosphorus based matches, driving them out of the market and thereby saving the lives of the workers. That was no doubt justified at the time. It isn’t any more.

  2. kl2008a says:

    Does that mean that McDonalds will have to lower their dollar for any size drink to continue to keep it a dollar? Enquiring minds want to know. I’ll bet the Costco’s/Sam’s Clubs outside the Richmond city limits will make a soda killing of this tax. I’ll bet that if they were to charge a buck an ounce more for booze and a quarter more for each cigarette that would go over like a juicy fart in church!