Supporters of a new soda tax in Seattle are giddy with excitement that the tax has brought in more than $10 million in only six months. City officials are looking forward to the new tax receipts for a variety of uses. The tax’s intention was to discourage people from consuming sugared drinks, because of the presumed health-related issues associated with an increased consumption of sugar.
It is truly interesting that the response to an extra influx from a tax intended to curtail drinking sodas is met with enthusiasm. If people are enthused that the tax has produced large amounts of new revenues, does that mean that they’re happy people didn’t stop drinking sodas, but rather gave reason to people to be excited about new taxes? Does it mean that the new tax’s proposed purpose wasn’t to curtail sugary beverage consumption at all?
The way new public policy often gets support is by attaching it to something people are against. In this case, everyone knows that consuming less sugar is healthier. So, by attaching a new tax to something people agree with, they have managed to gained enough support for a new tax to pass at a time when simply increasing taxes would not have enjoyed such support. While I am sure many people who campaigned for the new tax were sincerely wanting to curtail peoples’ sugary drinking habits (as unethical an idea it may be to try and force people to do something against their own informed decisions), there were likely many more people campaigning for this that were just looking for new tax revenue streams.
Now, the city of Seattle will incorporate this new revenue into various projects and efforts to supposedly better the city, and I am certain there will be much debate about how to best spend this new windfall of tax revenue. The problem is that it now becomes a fixture of the city’s budget. The city now needs these funds to continue operations that have been planned with these new tax revenues.
While some may be attempting to dictate healthy lifestyles to others and are doing so under the guise of good intentions, the fact now remains that the city, if it wants its new budget to remain intact, is in the position of needing to encourage people to drink more sugary drinks rather than curtail their usage. Otherwise, the city will be forced to remove items from the budget, and no government entity likes to do that.
Then, there is the issue of damage to businesses that create and sell sugary beverages. Seattle has been hit with a large number of government backfires that have hurt its own economy. It’s invited, through policy, many employers to leave town. This is one more invitation for makers and sellers of these beverages to pack up and go somewhere else. It’s another reason businesses should conduct their business somewhere else, leaving fewer jobs and less tax dollars all the way around, as well as reduced overall economic activity.
All of this is nearly always the case with “sin” taxes and with taxes that are intended to encourage or discourage behaviors. When we attempt to control behavior through taxes, we incentivize government to do the opposite of what was intended. Congratulations giddy people of Seattle! You just told your government that you want them to encourage you to be less healthy. You also allowed them to create new taxes on you that will be difficult, if not impossible, to get rid of. Will people drink fewer sugary beverages because they know they cost more? Probably, but now your city will be in a constant state of going into the red as people consume less sugar, and then what new tax will be next? Which industries will you want to collapse and give unfair treatment toward?