Governor Patterson's "Obesity Tax"

[blueriversam]

For those of you who do not watch Comedy Central, my good governor is proposing an obesity tax--that is, an additional tax on beverages with sugar. Now, I can understand that he wants to use this to discourage people from buying sugary sodas, but in effect, I doubt this will occur. It's like with qualudes, the only way to really stop people from using was to make it illegal to produce the ingredients. Otherwise, it's just additional money going to the legislature, kind of like taxing crack.

Being that this same governor set my office temperature to 55 for the winter break (so that I am "forced" to work from the comfort of my own bed), I doubt that his intentions were purely centered on the obese children of New York. He just wants to use obesity as an excuse to raise taxes on sugary beverages.

Not that it bothers me on a personal level, but it does bother me on a democracy level.

[kevindill]

"Sin" taxes on things like alcohol and tobacco, now sugar, are supposed to be to encourage good behavior. If you buy that I've got a bridge for sale.

[maxlharris]

For those of you who do not watch Comedy Central, my good governor is proposing an obesity tax--that is, an additional tax on beverages with sugar. Now, I can understand that he wants to use this to discourage people from buying sugary sodas, but in effect, I doubt this will occur. It's like with qualudes, the only way to really stop people from using was to make it illegal to produce the ingredients. Otherwise, it's just additional money going to the legislature, kind of like taxing crack.

Being that this same governor set my office temperature to 55 for the winter break (so that I am "forced" to work from the comfort of my own bed), I doubt that his intentions were purely centered on the obese children of New York. He just wants to use obesity as an excuse to raise taxes on sugary beverages.

Not that it bothers me on a personal level, but it does bother me on a democracy level.
#1 - Most states are irresponsible with income taxes from a policy level. The result ultimately winds up as state deficit spend and either higher federal taxes or federal deficit spending (I would be gnawing the chicken wing to explain why, but suffice to say, the first things states cut when they are in a budget shortfall is stuff that the feds tend to cover when the states don't... it's great election strategy: I lowered taxes and didn't cut services... nevermind that your TOTAL tax burden is higher).

#2 - Sin taxes work on the margins. And really, a tax on sugary bevs (which are really the worst thing out there) is a sin tax. While it will not get the hard core to switch, it will move people on the margin. It will also prevent more general taxes that are less discriminate. In terms of the economics, Sin Taxes are pretty good. Perhaps regressive, but nothing is perfect.

#3 - If you can buy a diet coke for $1.00 and you can buy a sugar coke for $1.10 and you are agnostic on the HFCS/nutrasweet issue, most people will opt for the diet coke. While this is not water, it is a win from a public health perspective.

#4 - Same situation, and instead of the consumer, you are a merchant. Your profit is the same (you get no portion of the tax), you will notice that your customers are drinking fewer sugar cokes and you are running out of diet bevs. You will stock more diet bevs. A win from a public health perspective as well.

#5 - Same situation, only you are now the beverage maker. Sales are a tad lower (some people would rather drink water than diet coke... a public health win) but sales of diet bevs are up by 30%. You might consider:
a- stevia sweetened beverages
b- a wider variety of diet beverages in 20 oz packaging.
c- more marketing for existing diet bevs that haven't taken off quite so well.
d- additional products in the diet millieu.
All of these are wins from the sugar conscious consumer perspective.

In my opinion as a public policy wonk and a part time economist, this is a very good idea, depending on the implementation. I think 10% feels like a good amount to make it significanty forceful without being bankrupting to industry, but I don't have the studies they've done nor the assumptions they've built in. I just picked 10% because it's round and it's more than a nickel a coke.

I haven't voted in NY in 14 years, but I like this measure from afar.

[maxlharris]

"Sin" taxes on things like alcohol and tobacco, now sugar, are supposed to be to encourage good behavior. If you buy that I've got a bridge for sale.

Please show me me your bridge. If you believe they don't work, I have some crow for you to eat.

http://en.thaihealth.or.th/index.php?option=com_docman&task=doc_download&gid=24

http://www.mackenzieinstitute.com/2002/terror080302.htm (I quibble that a paternalistic government is inherently bad)

http://www.bloggingstocks.com/2007/03/26/sin-tax-concept-expands-to-beer/

Lastly, if Coke and Pepsi are opposed, it will likely work. Since AB opposes any excise tax or sumptuary tax on it's products, they must be pretty sure they will work.

[blueriversam]

I like your perspective, Max, and I really hope to see more legislation. However, as with any addictive substance, I don't think that there can be a push to get people to quit taking this substance without actually removing it from the market. A lot of people (including myself) were able to quit smoking when it was banned in NY bars. That *really* helped me quit because I was able to go out with my friends and not smoke or see other people smoking. And face it, it's just too darned COLD to go outside and smoke ALL the time. So, I'd like to see sugary beverages banned from schools with the hopes that it will at least keep the kids from drinking sugar during the 8 hours they are in school. They tried to do this in my high school, but the beverage company won out by donating lots of money to the sports program.

[maxlharris]

There is a critical difference between tobacco and sugar that makes the outright ban of sugar from some establishments very different from the outright ban of tobacco.

Tobacco is not a "sole risk" product. Yes, you are greatly enhancing your odds of developing cancers and respiratory problems. But, you are also greatly enhancing the odds of others, like waiters, waitresses, bartenders, busboys, food expediters, cooks, dishwashers, bar backers, hostesses, maitres d', etc. So, your smoking is not just your own deal, it is a public health menace beyond your own consumption.

Sugar consumption, OTOH, is sole risk, like not wearing a helmet when you get on a motorcycle. FWIW, I'm not in favor of helmet laws or seat belt laws either. If you have the judgment that you should ride a motorcycle without a helmet, you take your odds and you don't really endanger anyone else. I think of it as evolution in action. Ditto seat belts. (Cell phones are a different deal... they cause accidents rather than increase survival/injury odds). Sugar is like that. And since it's a sole risk type product, I tend to think people should be allowed to do their own harm as long as there is minimal chance of blowback. Tobacco hurts people who work in bars, whether they smoke or not, and their familiers. Sugar hurts the consumer.

Not having kids, it's hard for me to have an opinion on what goes on in schools, much less what products are sold there and what public/private partnerships are in play there. But, if you want to find a optimal outcome, a tax works better here too. The beverage companies continue to fund music and athletic programs, allowing marginal school funds to go to core school things like textbooks, computers (dubious value) and reducing class size (also dubious value based on the evidence). The point isn't so much what they do with the money, the point is, money to education is generally better than money towards expensive (read: Football, Baseball, Swimming and Golf) althetics, in terms of educational outcomes, and every dollar contributed by a beverage provider is a dollar of property tax that either goes to something marginally better or goes back to property tax payers. The reason the tax works better is that high school kids, if they are anything like I was, tend to be very price sensitive. They have few dollars (almost all of them disposable, as a side point) which means that the difference between a $1.00 diet beverage and $1.10 sugared beverage will make more diet drinkers. Which, as above, will slant the balance of profits for the beverage producer and ultimately effect product mix offered in the school.

Lastly, different people have different reactions to the sugar. Some folks handle it well, others do not. An outright ban hurts some who have no hurt coming. A straight sumptary tax allows people to weigh how important sugar is to them.

[blueriversam]

You could say that the sugar tax penalizes the same--people who can handle the sugar are being unfairly penalized! In any case, I wasn't disagreeing with you at all. Quite the opposite. However, I do believe that additional legislation needs to be determined if fighting obesity is the primary goal. Increased taxes on cigarettes really had no bearing on my decision to quit smoking, I was happy to pay more to get my fix, even though I was in the lowest tax bracket of society at the time.

[Mal Lady]

Who pays for the people who can no longer work because they are in a vegetative state from an accident? Wearing no seat belt or helmet. Insurance or the government. Then, raising rates or taxes is another side effect of irresponsibility.:(

Sharon

[maxlharris]

You could say that the sugar tax penalizes the same--people who can handle the sugar are being unfairly penalized! In any case, I wasn't disagreeing with you at all. Quite the opposite. However, I do believe that additional legislation needs to be determined if fighting obesity is the primary goal. Increased taxes on cigarettes really had no bearing on my decision to quit smoking, I was happy to pay more to get my fix, even though I was in the lowest tax bracket of society at the time.

People who like the sugar are forced to put a dollar value on their like or their addiction. That's different than people who like the sugar or the tobacco being forced to quit. It changes the economics of the decision, towards a public health goal and, if managed wisely (no guarantees there) it funds the bad behavior of those who indulge. Typically it works to move behavior. In well governed societies, it even works to support those who don't.

[maxlharris]

Who pays for the people who can no longer work because they are in a vegetative state from an accident? Wearing no seat belt or helmet. Insurance or the government. Then, raising rates or taxes is another side effect of irresponsibility.:(

Sharon
If you ride a motorcycle within the law in all 50 states, you are insured. I do not believe the government should cover people who do stupid things (and yes, riding an inherently unstable open vehicle with large horsepower numbers without a helmet is an inherently stupid thing). Despite being a flaming lib, I don't think government should curb "instant evolutionary trends." I'm not a eugenicist, but if people are determined to have debilitating head injuries, who are we to change the rules to Survival of the Dumbest.

OTOH, I am a large believer in basic socialized health care, which would probably cover these people's medical bills.

[Anniesnan]

I live in NY and don't want or need a nanny. First we have Nanny Bloomberg, now Patterson wants to be one, too.

The price of cigarettes is ridiculous, but the majority of people paying "full" state/city price are those who don't have their own mode of transportation to drive to Jersey. I know people who make trips to Jersey, or to some Native American place - I'm not quite sure where it is - and some others who are buying through the internet.

For a dime, though, most of the sugared soda drinkers I know will just keep right on drinking them.

The city does not permit soda machines in the schools but it made a deal with Snapple. Kids pay more for Snapple that is permitted to be sold in the school and is definitely not sugar less. The only people I've seen buying the bottled water available in the Snapple machines are the adults.

Just call the whole thing an income producing scheme and don't try to claim that you are doing it for health.

[maxlharris]

I live in NY and don't want or need a nanny. First we have Nanny Bloomberg, now Patterson wants to be one, too.

The price of cigarettes is ridiculous, but the majority of people paying "full" state/city price are those who don't have their own mode of transportation to drive to Jersey. I know people who make trips to Jersey, or to some Native American place - I'm not quite sure where it is - and some others who are buying through the internet.

For a dime, though, most of the sugared soda drinkers I know will just keep right on drinking them.

The city does not permit soda machines in the schools but it made a deal with Snapple. Kids pay more for Snapple that is permitted to be sold in the school and is definitely not sugar less. The only people I've seen buying the bottled water available in the Snapple machines are the adults.

Just call the whole thing an income producing scheme and don't try to claim that you are doing it for health.
So, let's see. The 40% of the state that lives in the city is willing to pay $2/gallon in gas and god knows what in time to save $1.5/pack on cigarettes. Clearly, one of the billion additives to tobacco has addled their ability to do math.

Here's a scenario: take the tax money from the sugared beverage tax and put it in a state trust to cover state health programs. I don't know if this is what they are doing, but it would be economically perfect. Some quit sugar for other bevs: public health is served. Some pay more for sugar, their excess pay goes into a fund that will serve the ones who have worse outcomes. That's so elegant only an economist could have devised it. And why would the state do something quite so benevolent and elegant? Because a tax dollar put to it today allows income tax dollars to go into something else, rather than health programs, which are now funded.

FWIW: I like ciggy taxes, anti-ciggy-restaurant and bar laws, comsuptive taxes, the removal of seat belt and helmet laws and state lotteries. All have more or less elegant ways of taking people who do silly things and make them pay for the priviledge. Of course, I wonder about the incentives with a lottery funding education. If education goes up, lottery play goes down, then education goes down, and lottery play goes up. Unless of course, they stop teaching basic math skills (all that's needed to stop playing the lottery). But, that's now what you want your tax dollars going to, I'm sure.

[Ammy]

****sticking my nose in for one small comment****

So, let's see. The 40% of the state that lives in the city is willing to pay $2/gallon in gas and god knows what in time to save $1.5/pack on cigarettes. Clearly, one of the billion additives to tobacco has addled their ability to do math.

They wouldn't buy one pack...you would buy multiple, and probably some for your friends/family as well, therefore you would save money...


****backing out slowly and quietly*****

[laughingW]

Unless of course, they stop teaching basic math skills (all that's needed to stop playing the lottery).

Funding state services by busting out addicts gives me the creeps.

(That's assuming the "problem" users (<10%) provide 50% of the revenue. That was true a while ago for liquor. Don't know what it is for gambling and tobacco. And how many generations will it take to acknowledge that sugar is another such substance. )

Yah I know treatment is also paid for by the state services. I still think there is lack of full disclosure of how uneven that "tax" is, some disingenuousness goin on.

[maxlharris]

Funding state services by busting out addicts gives me the creeps.

(That's assuming the "problem" users (<10%) provide 50% of the revenue. That was true a while ago for liquor. Don't know what it is for gambling and tobacco. And how many generations will it take to acknowledge that sugar is another such substance. )

Yah I know treatment is also paid for by the state services. I still think there is lack of full disclosure of how uneven that "tax" is, some disingenuousness goin on.
Pareto's Principle. 20% of any group produces 80% of the result. Maybe it's more extreme, maybe a little less, but it is essentially a natural law of normal distribution.

On lottery: I call it the Idiot Tax. I usually say this around people who wind up playing the lottery.

I could understand gambling addiction wrt actually interesting games, but lotto and scratchers. You would have to have a very low threshhold for thrills.

[maxlharris]

****sticking my nose in for one small comment****



They wouldn't buy one pack...you would buy multiple, and probably some for your friends/family as well, therefore you would save money...


****backing out slowly and quietly*****

You spend $2 a gallon, driving from Queens to New Jersey to buy your discount cigs. You buy two, three cartons and you fill up on the cheap jersey gas. You've still burned 2-3 gallons of gas (paid off in the tax difference on what, 10 packs of cigs? It's not like Jersey has no ciggy tax, just radically lower). You've also burned an hour going and an hour coming back. Makes sense if you were going to the Jets, Giants, Nets, Devils or some other thing that's already in Jersey, but between tolls and gas and time, I think people's math skills aren't working. GWB is $5 each way.

Really bad math actually.
New Jersey has the highest excise tax on ciggys in the nation at $2.57 a pack. New York clocks in at $1.50. Of course, NYC clocks in with an additional $1.50. So, you save $.43/pack by going to jersey. I value my time at about $30 an hour. so we're talking about 150 packs just for my time. Another 15 for tolls.

http://www.taxadmin.org/fta/rate/cigarett.html

[blueriversam]

You spend $2 a gallon, driving from Queens to New Jersey to buy your discount cigs. You buy two, three cartons and you fill up on the cheap jersey gas. You've still burned 2-3 gallons of gas (paid off in the tax difference on what, 10 packs of cigs? It's not like Jersey has no ciggy tax, just radically lower). You've also burned an hour going and an hour coming back. Makes sense if you were going to the Jets, Giants, Nets, Devils or some other thing that's already in Jersey, but between tolls and gas and time, I think people's math skills aren't working. GWB is $5 each way.

Really bad math actually.
New Jersey has the highest excise tax on ciggys in the nation at $2.57 a pack. New York clocks in at $1.50. Of course, NYC clocks in with an additional $1.50. So, you save $.43/pack by going to jersey. I value my time at about $30 an hour. so we're talking about 150 packs just for my time. Another 15 for tolls.

http://www.taxadmin.org/fta/rate/cigarett.html

You can argue that someone would prefer to take the bus or PATH to NJ.

Speaking of smoking, MY ROOMMATE IS SMOKING IN THE HOUSE AGAIN. UGH. It is sooo annoying.

[maxlharris]

You can argue that someone would prefer to take the bus or PATH to NJ.

Speaking of smoking, MY ROOMMATE IS SMOKING IN THE HOUSE AGAIN. UGH. It is sooo annoying.
To get to PATH from Queens, you have to take public transit into lower manhattan. Since gas is cheaper than time, public transit only makes the argument more robust.

But here's the thing for my individual liberty internet buddies who don't like a nanny style government. You have to concede that in the world you live in, and with the governments your neighbors elect, you HAVE to have government services. And those services HAVE to be funded one way or another. You can fund them with debt, unless you live in one of the many states that has balanced budget amendments in their state constitutions. Or, you can fund them with taxes. I suppose you could fund them with pay-to-play type schemes and have government charge for services, like public transit works now, but for a lot of things, like early childcare, that's just not going to cut it.*

So, the question is: given that you don't want to fund your services with debt and you cannot really eliminate your services, you can only cut them back a little, who should pay? And that's where various taxes, like excise, sumptuary, income, flat and sales taxes come in.

Now, no one likes to pay tax. The reason I really like sumptuary taxes is because they are fairly easy to get around if you don't want to pay them (if there is a sumptuary tax on coffee, you skip coffee or you pay). Sumptuary taxes also have the ability to move policy goals, which can (in the case of smoking or HFCS sweetened beverages) reduce government expeditures in the long run. The other great thing about sumptuary taxes is that a dollar paid in sumptuary tax is a dollar less paid in income or sales tax.

I do not like sales taxes. They are almost always very regressive. If you think the lottery or a ciggy tax is regressive, think about taxes on basic food staples with regard to marginal income. If you are living paycheck to paycheck, sales taxes on staple goods are essentially cutting your income and your quality of life fairly drastically. On the other hand, do you think Bill Gates notices a 5% sales tax on his groceries? Granted, two extremes, but faced with the choice of sin taxes and sales taxes, I think one is a lot more fair than the other.

*In a lot of the third world, they make the people pay for things like public education. It continues a cycle of poverty that is inherently the antithesis of the core values of America. While I would not love to pay property taxes to fund schools I do not send kids to, I would like even less to live in a society where children lacked the basic access to education and other services key to social mobility. If you don't like the city now, consider what it would be like with a permanent underclass with zero chance of advancement and a permanent overclass with zero chance of mingling. I'm not saying we don't have generational cycles of poverty, but we don't have anything like what you find in subsaharan Africa or Southern Asia, either.

[Mal Lady]

If you ride a motorcycle within the law in all 50 states, you are insured. I do not believe the government should cover people who do stupid things (and yes, riding an inherently unstable open vehicle with large horsepower numbers without a helmet is an inherently stupid thing). Despite being a flaming lib, I don't think government should curb "instant evolutionary trends." I'm not a eugenicist, but if people are determined to have debilitating head injuries, who are we to change the rules to Survival of the Dumbest.

OTOH, I am a large believer in basic socialized health care, which would probably cover these people's medical bills.

But, Max, don't you think that insurance rates go up for "everyone" if the companies have to deal with these kinds of injuries. I think there are a lot of people on disablility because of motorcycle injuries that are caused with people not wearing helmets. My stupid cousin being one of them. I do believe that seat belts have saved many lives and they are not an inconvenience - just a good habit. It's just some people don't want to use them because they are lazy. If the can pay for their care without any "help" from government or insurance - then they are "free" to do as they please. Like cigarettes. Most won't be able to afford it.

Sharon

[kevindill]

Please show me me your bridge. If you believe they don't work, I have some crow for you to eat.

http://en.thaihealth.or.th/index.php?option=com_docman&task=doc_download&gid=24

http://www.mackenzieinstitute.com/2002/terror080302.htm (I quibble that a paternalistic government is inherently bad)

http://www.bloggingstocks.com/2007/03/26/sin-tax-concept-expands-to-beer/

Lastly, if Coke and Pepsi are opposed, it will likely work. Since AB opposes any excise tax or sumptuary tax on it's products, they must be pretty sure they will work.

Sorry but I didn't see any relationship between taxes and behavior in any of those articles. They only thing I read is how much money they raised for the various governments.

[blueriversam]

So if a tax is put into place on sugary beverages in order to pay for increased health costs due to the consumption of sugary beverages, isn't it fair to say that by reducing access to these beverages (or other limiting legislation) might have the same effect, only better because people aren't getting sick?

[maxlharris]

But, Max, don't you think that insurance rates go up for "everyone" if the companies have to deal with these kinds of injuries. I think there are a lot of people on disablility because of motorcycle injuries that are caused with people not wearing helmets. My stupid cousin being one of them. I do believe that seat belts have saved many lives and they are not an inconvenience - just a good habit. It's just some people don't want to use them because they are lazy. If the can pay for their care without any "help" from government or insurance - then they are "free" to do as they please. Like cigarettes. Most won't be able to afford it.
Stupid cousin. Nice. But that's exactly what I am talking about.

I've said my part on this. From an economist's perspective and from a public policy perspective, I like sumptuary taxes. I've explained why. From an individual liberty perspective and an instant evolution perspective, I don't like mandatory helmet and safety belt laws. I think I've explained that one pretty thoroughly. And from the perspective of an economist, a public policy nerd and someone who eats in restaurants and goes to bars, I've explained why I like ciggy bans in these places. Lastly, from an economist's perspective, I've explained why sugared beverages are different from ciggies. I think that's everything.

Except, I haven't explained why transfats are different from both ciggies and HFCS/sugar bevs. They are in the middle. Transfats might be straight up poison. There is no acceptable doseage. Which makes them like ciggies, sort of. But, my consumption of transfats doesn't make the bar girl or my kids have a higher rate of cancer or heart disease. Which makes transfats a little more like HFCS/sugar bevs.

Figuring out a proper public policy intervention for transfats is more complicated. From an individual liberty perspective, eating them is "your funeral" and not everyone around you's, so, I don't know that strict intervention (as seen in New York City and other municipalities) is warranted. On the other hand, TFs could be WAY more toxic than HFCS/Sugar bevs. So, I'm not sure that a sumptuary tax is the correct response either. IMHO, the restaurant ban is a good step until there is more information. If they are as deadly as believed, a general ban would be a good idea, regardless of the corporate damage. If they are only moderately bad, a sumptuary tax is probably the right response.

All of the above is my interpretation of the facts at hand. It is not the only valid interpretation, even from an economic standpoint.

[maxlharris]

Couple more things:
Here's New York State Health Commissioner Dr. Richard Daines talking about the tax.

http://www.youtube.com/watch?v=ARMgjdbY93o

A bit long, but he makes the case. I believe the finding of the ADA. I know an awful lot of overweight people who have had major sweetened beverage habits (self included, and Missy as well... get her started on her Iced Tea habit or me on my Sugar Coke habit during my expansionary years). But, more to the point, his explanation of how it works is how I would design it.

18% seems kind of stiff (and not round, so hard to calculate, making a lot of $1.00 and $3.50s into $1.18 and $4.13s. But maybe their research suggests that 10% is too trivial to move people and 20% would lead to riots in the street.

Any rate, the last thing I'm gonna say on this is: I think it's great policy. If my governor weren't under indictment and impeached, I'd hope he'd follow suit.

[Anniesnan]

Max,

Taking your percentages and figures as perfect, the people I know don't go into Jersey to buy one carton or two. They also do it when they are going on some other sort of trip - such as shopping at a Jersey mall for decreased or no clothing sales tax(I know it's less, don't know precisely what it is - I value my time) - and while they are there, they fill up the tank .
Not from Queens, not over the GWB.

The internet shoppers also buy in bulk.


Me, personally, I like sales taxes, but not on any "food" products.
I think anyone who pays anything for cigarettes is crazy.

and let there be an income tax - but it should be a flat rate with NO deductions

The lottery is a joke - it seems the more people play, the less goes to education.

[maxlharris]

Me, personally, I like sales taxes, but not on any "food" products.
I think anyone who pays anything for cigarettes is crazy.

and let there be an income tax - but it should be a flat rate with NO deductions

The lottery is a joke - it seems the more people play, the less goes to education.
Sales taxes are all regressive. Unless they are luxury taxes. Which could be seen as sin taxes for being wealthy. Which is unamerican. Generally.

A flat rate income tax is also regressive.

What makes these taxes regressive is that all income is not marginal or free income. People have fixed costs. Things they have to buy. So, when someone makes $20K, they have almost no marginal income after housing, food, clothing and the other essentials. So, to tax them at a flat 18% or 25% is to cut into their purchase of essentials. Whereas, someone making $75K a year has more margin between the fixed essentials (which aren't necessarily fixed since more money = bigger house, higher bills, etc, but are nonetheless mandatory expenses) and their total income. And the $200K+ people, the top 1%, have most of their income in marginal income.

As it turns out, when you factor in all the federal taxes that people pay, we wind up with a flat tax. The things like medicare, social security and other payroll taxes are flat from dollar 1 to certain points around 80-125K. The income tax rate goes up on those over the payroll tax caps. In fact, if you factor the investor class, we are actually a shade regressive, rather than the progression that many so-called "tax advocates" decry.

One way to help sort the flat tax out as the regressive tax it is: You ONLY hear the very wealthy talking about it on TV and in editorials like it's a good thing. Steven Forbes and Ross Perot are fabulously wealthy and would stand to see massive tax reductions with a flat tax or a sales tax.

Personally, I love the lottery. It is essentially a six tax. The sin is not paying attention in math class.

Rather than be a downer on flat tax and sales tax, I would offer alternatives to fund government:
1- Actual enforcement of tax laws.
2- No more settlements of large tax debts for nickels on the dollar.
3- Value added taxes.
4- lotteries.
5- excise taxes on certain products (like tobacco and alcohol)
6- sin taxes on other products
7- Reduction of farm subsidies.
8- Other subsidy reductions.
9- Actual progression in taxes where a low tier is exempted, a middle tier pays a moderate rate, and the investor class pays for their share of services and defense.
10- An increase in the capital gains tax to match the general income tax rate.

that's how I'd go about working revenue. You can start with collecting what you're actually owed before you go into massive reforms. Then you can add some sumptuary and excise taxes. Then, you cut some anti-consumer spending (production subsidies are inherently inflationary). And then you build a base tax system from scratch. Assuming you need to do so.

[kevindill]

The problem with income taxes are that they tax productivity. Also, applied at a national level, what passes for a middle class or rich income in BFE is very different than what is required in the eastern megalopolis to achieve the same lifestyle. Lastly income taxes often do not tax the wealthy as the wealthy often have very little income, and what income they do have is often sheltered.

[maxlharris]

The problem with income taxes are that they tax productivity. Also, applied at a national level, what passes for a middle class or rich income in BFE is very different than what is required in the eastern megalopolis to achieve the same lifestyle. Lastly income taxes often do not tax the wealthy as the wealthy often have very little income, and what income they do have is often sheltered.

When the top marginal tax rate in the US was 78%, did anyone say, "You know, I could make more money, but why bother?" The argument that Income Taxes provide negative incentive to earnings is on it's face, and based on the data, absurd.

Again, on the income tax reform, I would remove CAPITAL GAINS rates, and make income from capital gains count as regular income (essentially, it is). The investor class then pays for what it uses.

If you don't like income taxes, Kevin, please explain how you would fund your government to provide the services it does. Forget about services you don't like, and tell me how you would fund things like defense, currency production, central banking and other core essentials that even the "Drown government in a Bathtub" crew admit are necessary.

I have already taken apart why sales taxes are inherently unfair. I can easily further slay arguments against income taxes. I can take apart import taxes and export taxes, if you'd like.

Last thing, in defense of the income tax: This is undeniably true: Rich People use more government stuff than poor people do. They get the most benefit from defense, from currency minting, from central banking, from infrastructure, from job training (more trained workers = lower labor costs), from commerce regulation and from environmental legislation. If government makes the whole pie better, the people who own the largest slices of the pie get the best of it. This is empirically provable.

Given that, is it still unfair to ask people who make more to pay more for their larger pie slices?

[kevindill]

OK, first and foremost, I am a libertarian. I don't think the federal government should be involved beyond what is minimally described in the constitution. All other activity should be left to the several states, to fund as they see fit.

Central banking and currency production are part of the problem.

The number of tax shelters available during the days of 78% marginal taxation pretty much ensured only the most stupid paid it.

Oddly enough, we found a way to fund government activities prior to the commencement of income taxes in 1913.

The people with incomes in the top 1% already pay more than the bottom 90% combined, while the bottom 50% pay less than 3% of all income tax. That's not progressive enough for you? The "rich" are already paying for what they and everybody else uses. Everybody needs to have the same relative amount of skin in the game. Why should "the people" who pay little or nothing remove from me by threat of force what I've worked for.

Additionally you seem to confuse income with wealth.

[maxlharris]

If you don't like income taxes, Kevin, please explain how you would fund your government to provide the services it does.

OK, first and foremost, I am a libertarian. I don't think the federal government should be involved beyond what is minimally described in the constitution. All other activity should be left to the several states, to fund as they see fit.
...


I don't see an actual solution presented. Merely discussion of what the bounds of government should be and how government didn't fund itself 96 years ago.

PS: From the Minimally Described in the Constitution file, I present to you, for consideration, Article 1, Section 8, Clause 1 (http://www.usconstitution.net/xconst_A1Sec8.html). And the 16th Amendment (http://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitut ion#Text).
I suppose you can object to the 16th if you live in CT, FL, PA, RI, UT or VA. (Funny, I've lived in two states on that list).

Kevin, meet Sam.

So if a tax is put into place on sugary beverages in order to pay for increased health costs due to the consumption of sugary beverages, isn't it fair to say that by reducing access to these beverages (or other limiting legislation) might have the same effect, only better because people aren't getting sick?
The thing here is that sugary beverages aren't always deleterious. And we are typically about choice when your choice (to drink sugary crap) doesn't affect the health of others (like smoking does). Right Kevin? True Libertarians don't believe in outright bans any more than they believe in a strong federal government. Granted, they don't like taxes, but given the choice between a government boogey man telling you what you can and can't do and a government boogey man taxing you on stuff you probably shouldn't, but giving you the option, you would probably take boogey man #2. Unless it's something like cancer sticks, which kill restaurant and bar employees as dead as actual smokers. Or, unless sugar is more like arsenic or lead (although true personal liberty people think you should be free to make an arsenic milkshake with absinthe and drain cleaner).

[laughingW]

And we are typically about choice when your choice (to drink sugary crap) doesn't affect the health of others (like smoking does).
Isn't part of the thinking on sin tax, that even drinking sugary beverages affects others by your being a drain on health care costs. ie anything that "increases the risk of" is bad. (grrrr, the epidemiological studies)

[maxlharris]

Isn't part of the thinking on sin tax, that even drinking sugary beverages affects others by your being a drain on health care costs. ie anything that "increases the risk of" is bad. (grrrr, the epidemiological studies)

I think that's a different risk that the sin tax, as you note, handles appropriately.

Smoking does that, but it also makes people who work where a lot of smokers go (like bars) ill. So, it has a multiplier effect. Blowback. Downstream. Collateral damage. Not only does the smoker take up more health care resources, but others, who don't smoke, wind up there as well.

Sugar does cause diabetes in some, obesity is more, and overweight in still more. But my consumption of 80 oz of sugar coke a day didn't make the folks who served them overweight or diabetic. But, it would make me a drain on the health care system, if I didn't have insurance of my own (of course, I work for the government, so if enough of us drink enough regular coke, the taxpayers will have to front more as our rates go up and the risk pool's risk elevates).

Thanks Laughing. We have moved closer in our thinking, I think. I'm not sure who moved, or if we both did, or if we listen better or what, but something has clearly changed. I'm enjoying it and hope you are as well.

[kevindill]

Acutally I said

Everybody needs to have the same relative amount of skin in the game.

It goes to that taxation and representation and equality under the law thing people like to talk about. :)

which leads us too ...you chose to ignore

The people with incomes in the top 1% already pay more than the bottom 90% combined, while the bottom 50% pay less than 3% of all income tax.

Further, I've seen no proof offered that a tax on sugary beverages would deter usage. Your arguments are approaching the fallacy of the slippery slope.

[laughingW]

I'm enjoying it and hope you are as well.
Well actually I am enjoying it. I'd hate to admit being won over. :)

One more thing to throw into the tax mix -

has this thread discussed Regina Wilshire's point, that we pay federal taxes toward subsidized HFCS that makes cheap soda, and now New Yorkers pay tax again to drink it? .

[maxlharris]

Acutally I said



It goes to that taxation and representation and equality under the law thing people like to talk about. :)

which leads us too ...you chose to ignore



Further, I've seen no proof offered that a tax on sugary beverages would deter usage. Your arguments are approaching the fallacy of the slippery slope.
1- The top earners and the top owners have more skin in the game than they are paying. I wrote a long response, decided it was a bit mean, and cut it back.

2- I posted links to successful implementation of so-called sin taxes earlier in this thread. I can also dump links to cigarette use and excise tax increases. While sugar is addictive, I don't think anyone is suggesting that it's hard to kick than nicotine.

3- I asked twice for alternative solutions. You have provided nil, save mild insults and program denigration. Again, if you believe in nothing, you will fall for anything. I think that's the problem with the modern libertarian movement. You believe in a core of negative values without a central positive value. A strict belief in lack of things brings you nothing. It makes you essentially like a movement I believe deeply in, atheism. We cannot organize because we have a central core of non-belief. So, for the final time (before I just put the hard kibosh on KevinDill and you can talk mild smack about me all you like)
a- Do you have a better solution that the governor of New York can put into play that will drive the state's health bill down, without reducing benefits, and will be something like acceptable to any companies that it might displace.
b- Do you have a better solution that is based in reality to replace the income tax that doesn't shift the burden from people who have the most skin in the game to the people with the least (ala: flat taxes and broad sales taxes).

If you can't, welcome to my greasemonkey script. It's been fun. If you can, I am all eyes.

[Missy]

HOLY COW...ARMAGEDDON IS A COMIN'...Laughing and Max are seeing eye to eye, and I'm losing weight!!!!!! :eek::eek::eek::eek:

[maxlharris]

Well actually I am enjoying it. I'd hate to admit being won over. :)

One more thing to throw into the tax mix -

has this thread discussed Regina Wilshire's point, that we pay federal taxes toward subsidized HFCS that makes cheap soda, and now New Yorkers pay tax again to drink it? .
Not yet.

Here's the other funny thing:
We also subsidize sugar production from beets (inherently more expensive than cane, which will only really grow in Florida and Hawaii domestically) with federal tax dollars.
And
We also maintain insane tariffs and quotas on foreign sugar importation mostly to put the screws to Cuba.

The tariffs and quotas essentially drive the price of sugar up to where it is not competitive with corn. One of the core reasons why HFCS is in everything goes back to US Cuba/Sugar policy.

Other funny things: Haiti is basically the crap hole of the western hemisphere. Haiti's main crop from colonial times has been sugar. We might care about what happens in Haiti, we may not, but our Cuba policy helps keep Haiti poor, and the poverty in Haiti keeps Haiti unstable. So, the next time there's violence in Haiti (like next month or next year) that's the US's Cuba policy (and the remnants of French foreign policy in the 19th century).

I'm a free trade person. Free trade and markets for most products. And, if you believe, as I do, that sugar isn't great, but it's better than HFCS (have been swayed), then you might want to ask your politicians to reexamine our Cuba policy and who is really being served by it.

[kevindill]

1- The top earners and the top owners have more skin in the game than they are paying. I wrote a long response, decided it was a bit mean, and cut it back.

2- I posted links to successful implementation of so-called sin taxes earlier in this thread. I can also dump links to cigarette use and excise tax increases. While sugar is addictive, I don't think anyone is suggesting that it's hard to kick than nicotine.

3- I asked twice for alternative solutions. You have provided nil, save mild insults and program denigration. Again, if you believe in nothing, you will fall for anything. I think that's the problem with the modern libertarian movement. You believe in a core of negative values without a central positive value. A strict belief in lack of things brings you nothing. It makes you essentially like a movement I believe deeply in, atheism. We cannot organize because we have a central core of non-belief. So, for the final time (before I just put the hard kibosh on KevinDill and you can talk mild smack about me all you like)
a- Do you have a better solution that the governor of New York can put into play that will drive the state's health bill down, without reducing benefits, and will be something like acceptable to any companies that it might displace.
b- Do you have a better solution that is based in reality to replace the income tax that doesn't shift the burden from people who have the most skin in the game to the people with the least (ala: flat taxes and broad sales taxes).

If you can't, welcome to my greasemonkey script. It's been fun. If you can, I am all eyes.

I read your articles about excise taxes, which as a policy I have no trouble with - they are a tax you choose to pay or not. What I haven't seen is evidence that they impact behavior, correlation is not causation and all that. In fact I'd posit that the gov't counts on the fact that people will continue their behavior so as to fund the gov't coffers. ( think we are seeing the same thing but from different frames here, but I could be wrong)

As to income tax..... the bottom line aside from all philosophical quibbling is this, as a business owner, I am going to get mine. Raise my taxes and as long as I can increase revenue enough to cover the difference in my bottom line, no big deal. If not, I will lay people off, reduce productivity by expending resources on tax avoidance, and shift costs. The people who are going to bear the brunt of this tax increase are the ones whom this tax increase is allegedly supposed to benefit. In the current environment the latter is already happening.

As to a solution, I support a flat tax. I've read your reasons against it, but I remain unconvinced.

[maxlharris]

As to income tax..... the bottom line aside from all philosophical quibbling is this, as a business owner, I am going to get mine. Raise my taxes and as long as I can increase revenue enough to cover the difference in my bottom line, no big deal. If not, I will lay people off, reduce productivity by expending resources on tax avoidance, and shift costs. The people who are going to bear the brunt of this tax increase are the ones whom this tax increase is allegedly supposed to benefit. In the current environment the latter is already happening.

As to a solution, I support a flat tax. I've read your reasons against it, but I remain unconvinced.
At this point it's philosophy and base assumptions. Dogma. Here's what's at my core on flat taxes. You are welcome to be unconvinced. It doesn't alter the underlying economics:

1- total taxes are currently flat. That is federal income and wage taxes. So, a flat tax, with current entitlement programs (and in the world of realpolitik, try taking those away from people who vote very heavily and are well organized and find yourself unelectable in any state), winds up being heavily regressive,unless you remove caps on wage taxes like social security and medicare.

2- Flat taxes look wonderful when you consider income or wealth in general. But income isn't the same. You really have to consider marginal income. Lower income individuals, the people who go paycheck to paycheck or don't even quite make it from paycheck to paycheck, have no marginal income. Investment bankers with 6 figure bonuses have probably 80% of their income in marginal income. Under a flat tax, you are uncrimping the lifestyle of the I-Banker (or crimping him down from a AMG Mercedes down to a regular consumer one) while forcing more people to turn from saving to paycheck to paycheck and forcing paycheck to paycheck people to make hard to impossible choices. That doesn't actually feel that flat.

3- The biggest proponents of flat taxes that I am aware of are Ross Perot and Steven Forbes. Both a billionaires with low income and massive wealth. That should make anyone skeptical. Of course, you can make a philosophical argument about wealth doing well being the most important thing for the total economy, but it's difficult to make a total good argument about that, even if you believe in supply side economics, which is, to my mind, a further stretch than believing that sumptuary taxes shift consumer behavior.

As to shifts in behavior, in a discussion on my page on Facebook, I have at least one friend, from New York City, who quit smoking due to the city's excise tax. That's an annecdote, but I can find and cite some studies on the effects of sumptuary taxes, and proper design of such.

Given the easy substitution from sugar coke to diet coke, from sugar tea to sugar free tea and from juice drinks to juice, I believe that an 18% tax will move it.

Lastly, if the money goes to treat the outcomes of people who do not change their behavior, you are essentially creating a use tax for the extra burden on the health systems of New York State, with some movement from the rich to the poor. Although, going back to marginal income calculations, if you are paycheck to paycheck, and the cost of a staple jumps 18% and you have an easy substitute, I think you will move it. If you've never lived paycheck to paycheck, it's hard for you to understand.

I lied. This is the last. I reject arguments that raising your tax rate will cause you to lay people off. You still have an incentive to maximize profit. You just have an extra cost. You might try to work more efficiently, which you probably should be doing anyway. If there's fat in your organization, you should be cutting it now, because you are currently leaving profit on the table. If you are simply resentful of taxes and would like to make less, then you would scale back your operation, and essentially cut off your nose to spite your face. I imagine you have a nice face that doesn't deserve spiting. So, if/when you are faced with decisions about how to run your business in the face of higher taxes, I suspect you will continue with business as usual, and perhaps raise prices or learn to be more efficient, but not scale back your organization wholesale. Think it through for yourself. What maximizes profits when you have a cost increase?

[kevindill]

I wasn't going to do this but .... From where I sit, the people with low incomes are all young, live with their parents and literally and figuratively piss their money away. On the other hand a young doctor I know makes about 100K, is saddled with debt from school, is struggling to pay his debts, save money to buy a house and pay for his wife to finish college. But according to your assumptions, the kids need their money more.

BTW Investment bankers make a boat load more than 100k, or at least they used too.:)

[Gaelen]

Hello, economists, philosophers, amateur political theorists and other innocent bystanders...
Based on the nature of this discussion and the course it has taken--far afield of its original launch pad in "Making Protein Power work 24/7"-- I'm moving this topic to "Media Watch." It's not exactly a perfect fit there, but at least that forum is a better spot for far-ranging, off-plan discussions that don't bear directly on what it takes to make Protein Power work on a daily basis.

For those of you who do not watch Comedy Central, my good governor is proposing an obesity tax--that is, an additional tax on beverages with sugar. Now, I can understand that he wants to use this to discourage people from buying sugary sodas, but in effect, I doubt this will occur. It's like with qualudes, the only way to really stop people from using was to make it illegal to produce the ingredients. Otherwise, it's just additional money going to the legislature, kind of like taxing crack.

Being that this same governor set my office temperature to 55 for the winter break (so that I am "forced" to work from the comfort of my own bed), I doubt that his intentions were purely centered on the obese children of New York. He just wants to use obesity as an excuse to raise taxes on sugary beverages.

[maxlharris]

I wasn't going to do this but .... From where I sit, the people with low incomes are all young, live with their parents and literally and figuratively piss their money away. On the other hand a young doctor I know makes about 100K, is saddled with debt from school, is struggling to pay his debts, save money to buy a house and pay for his wife to finish college. But according to your assumptions, the kids need their money more.

BTW Investment bankers make a boat load more than 100k, or at least they used too.:)
Nice generalizations. People with low incomes are all young (untrue), live with their parents (untrue), literally and figuratively piss their money away (untrue). all are possible, but the people you describe are definitely the smaller portion of the paycheck to paycheck crowd.

Your young doctor on the other hand:
1- chose a profession with a high start up cost.
2- probably drives a new car that's beyond his real means factoring debt.
3- Probably fell into the housing ownership fallacy and has a house, probably a McMansion.

Gee, that's fun. It's probably not really indicative of what your average young doc is like financially (except for #1). Oh, I forgot, your young doc typically gets health insurance as part of being on staff at a hospital (not true of paycheck to paycheck people), has more marginal income beyond his loans (I have over $90K in loans and my monthly maintenance is $750. Double my debt to make an MBA a doctor and you have $1400-$1500 a month against a six figure income. 18% of his gross income goes to debt maintenance. As opposed to someone making $35K a year without college debt. Doc still has $82K before taxes versus $35K. I don't buy it. It's an argument from extremes and even the extremes don't really pull it.

But, let's assume your argument from the margins is valid and makes sense. I will grant you everything. And the doctor STILL has incentive to make more, even if he is taxed more. He STILL has his fixed cost of debt. He STILL has his mortgage and his Beemer. He STILL has his insurance costs. Even with a higher tax, he STILL needs to pay all of this and fund his IRA and all of that. So, his incentive to maximize is STILL intact.

But, forget specific examples. Let's just take a hypothetical person.
This person has no fixed costs. No loans, no house, no nothing. Being someone other than the Buddha, this person wants stuff. What stuff doesn't matter. They want to travel, they want to dress nicely, they want a fancy car, bar drinks, gourmet food, a big house, a guitar, a golf club, whatever. Doesn't matter. They have an income. In a world without tax, they work to make money to get stuff. In a world with tax, they have to work more to get the same amount of stuff. They continue to have motivation towards making money, regardless of their marginal tax rate.

Or, seen another way, hypothetical man has fixed costs. Those costs must be met. So, regardless of the tax level, Fixed Cost man has to make an income. With a 10% higher tax, he has to work more, or work smarter, or reduce his fixed burden.

Last theoretical example: A publicly held company. Regardless of the tax rate, this company has shareholder. They expect dividends and returns on their investment. So, regardless of the changes to their cost structure, whether it be the cost of capital, the cost of labor or the cost of doing business (like a tax), the company retains it's incentives towards profit maximization.

Last thing: I never said I-Bankers make $100K. I said they make six figures in bonus.

Investment bankers with 6 figure bonuses have probably 80% of their income in marginal income.