Wednesday, July 29, 2009

Taxing bad stuff to get less of it

You'll see that I added a Twitter widget to the right hand sidebar that displays my most recent tweets. A couple days ago, I tweeted:

Want to solve health care, the budget, obesity, diabetes, & global warming? Tax the hell out of soda, sugar, cigs, carbon, & toxics. Done!

Today I want to play this concept out further and examine what this says about the larger political context. Let's break it down like this:

1. I believe the policy solutions to many of our most pressing problems as a nation are known and readily available.

2. Both conservatives and progressives agree that when you tax something you get less of it (said differently, the more something costs, the less of it people will buy -- taxes raise the cost of things, which thereby decreases the amount people will buy.)

3. We can actually calculate the true cost of various unhealthy choices. The Centers for Disease Control and Prevention published research in 2002 showing that the cost of each pack of cigarettes sold in the United States was more than $7 in medical care and lost productivity. Just this week the CDC estimated the public costs of obesity in the U.S. at $147 billion a year -- roughly 9% of all health care spending in the U.S.. Similar figures can be calculated for the cost of pesticides and other toxins in everyday use a well as the true cost of a ton of carbon dioxide (which causes global warming).

4. So one solution to our various public policy problems -- declining public health, rising health care costs, toxics, global warming, etc. -- is to tax the hell out of the things we want less of in society (as I tweeted above). Tax the hell out of:
  • cigarettes (at least $7 a pack)
  • soda (at least 3 cents per 12 ounces)
  • sugar (at true cost)
  • transfats (at true cost)
  • toxics (at true cost)
  • gasoline (at true cost)
  • carbon (at least $43 a ton but probably higher)
The benefits of these taxes would be twofold: 1.) The taxes would raise revenue to pay for much needed services -- health care, transportation infrastructure etc. (and repay the full cost of each of these choices). 2.) The cost of each of these items would be higher -- so people would use less of them -- people would smoke less, eat less sugar, use fewer pesticides on their lawn, switch to organics, and consume less energy and more locally produced food. Win, win, win, win, win, win. Done, done, done, done, done, and done right? Easy peezy right!

5. But, let's play that out (and by now you're probably raising your own doubts about the viability of these proposals). So what happens the first day after Congress proposes a 5 cents per pound tax on sugar for example?
  • Sugar lobbyists storm the Hill and start flooding Republican and Blue Dog Democrats with campaign contributions. Okay, no big deal, it's still in the public interest -- it'll get passed correct?
  • Then the TV ads start -- Harry and Louise and their kids start crying into their soda talking about the dark days of sugar lines around the block for a pack of gum.
  • Then the TV networks figure out that if people are consuming less soda, then Coca-Cola and Pepsi have less money for advertising -- and so suddenly news coverage becomes obsessed with concern trolls worrying about the sugar tax.
  • Newspapers owned by the TV stations (like the Murdoch-owned Wall Street Journal) start editorializing about the dangers of the evil sugar tax. Other publications, following the herd, join the chorus.
  • The right goes into full outrage mode -- whipping their base with talk that, "First they wanted a War on Christmas (TM) and now they want to outlaw childhood and joy." And religious surrogates for the corporate right go into hysterics, decrying from the pulpit, "You'll have to pry this Snickers out of my cold dead hands."
We all know the playbook because we've seen it before. I'm not saying it can't pass -- but only that there are lots and lots of interests (beyond the individual sugar producers for example) who get brought to bear on preventing even urgent, life saving reforms.

6. But here's the kicker for me. If we can't pass even obvious easy reforms -- like a true cost tax on cigarettes, sugar, pesticides etc. then what makes us think that we can pass meaningful reform that tries to achieve these same policy objectives by other means? If we don't have the votes to do it in the correct obvious way, what makes us think that a more complicated convoluted bill will enable us to achieve the same goals? Lobbyists have calculators too -- they can figure out whether the proposed bill will reach the stated objective or not and will respond accordingly. That's how bills that start out rational become irrational -- in trying to placate interest groups the original goal can get lost.

7. So I don't know, I guess all of this leaves me feeling like, politically, if you're gonna take Geneva take Geneva. If we want to reduce global warming -- propose a carbon tax and force and up or down vote rather than producing a voluminous, nicely titled bill, about (maybe) regulating carbon (a bit). Because in making a bill more complicated -- we lose the momentum and moral upper hand in the debate. Let people know what they are voting on, keep it simple, and force the vote. If you have the votes great. If you don't -- let's not pass a bill that claims it will achieve goals that it likely will not actually be able to achieve (but will only make us feel as if we have done something grand when we haven't).

8. Which of course is what Congress actually does. Representatives and Senators are smart people -- if they had the votes for a simple bill they'd just pass it. But they don't -- so they try to cobble together 50% +1 -- picking off a vote here and there with incentives and compromises. But that suggests that our entire political system is deeply irrational from the outset. The invisible hand theory of markets suggests that together the interests of each individual party will meet our collective needs. But practically speaking, when it comes to legislation promoting a common good, placating the individual interests of effected parties is often at odds with the rational public policy interests of the nation as a whole.

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