Economists weight in on sugar tax

Tamar Haspel has another sensible article in the Washington Post, this time on the potential effects of a soda tax.

She interviewed a slew of top food and agricultural economists, and by and large, I agree with most of what they had to say.  There were three points I would have added.

First, Haspel discusses the potential of sugar (rather than soda) taxes without mentioning the fact that sugar is ALREADY taxed (indirectly via various government programs).  Here's what I wrote in a short piece for the Congressional Quarterly on the issue:

“Should the government tax sugared soda? It already does. Farm policies make U.S. sugar prices two to three times higher than elsewhere. Moreover, ethanol policies have led to a more than doubling of the price of high fructose corn syrup since 2005. It’s no wonder that per capita sugar consumption has fallen precipitously over the last decade.”

Second, while Haspel mentions a quote from the industry that the taxes are "unfair", she doesn't mention that they're regressive -meaning  the costs being born relatively more by those who can least afford to pay them.  Yes, we need to raise government revenue some way, but as I've noted before, even some good economists seem to miss the fact that we should choose taxes in a way to minimize dead weight loss, not how taxes feel or appeal to a particular cause.

Finally, despite acknowledging that soda taxes are likely to have very little benefits, Haspel concludes,

“If the choice is to do this or do nothing, I choose this. ”

I'm sorry, but if my choice is between nothing and a policy that is paternalistic, regressive, will create economic distortions and deadweight loss, and is unlikely to have any significant effects on public health, I choose nothing.   

Who are the Soda Tax Baptists and Bootleggers?

That is a question asked by Adam Smith and Bruce Yandle in an article over at Reason.com.  They write of the traditional Baptist and Bootlegger scenario where one group with the moral high ground gives cover to another group with entirely different motives:

“Why “bootleggers and Baptists”? Recall that both historically supported laws that shut down liquor stores on Sunday, but for entirely different reasons. Taking the moral high ground, the Baptists fervently hoped to see a decline in alcohol consumption. Just as fervently, the bootleggers longed to eliminate competition at least for one day a week. Together, they formed a powerful duo.”

They then go on to discuss the various calls for soda taxes.  But, they apparently only see Baptists and no bootleggers.

“The “Baptist” part of the story is clear cut. Long-time support for such excise taxes comes from the American Heart Association, the American Academy of Pediatrics, and the NAACP. These and other organizations see sweet drinks as a major detriment to American health and well-being that feeds our skyrocketing obesity and diabetes rates.

...

But where are the bootleggers? If we probe a wee bit deeper, we may discover why there is no bootlegger/Baptist success story for taxing away sugary drink consumption. Bootleggers are generally associated with producing substitutes for the highly-taxed or regulated item. For example, U.S. producers of natural gas love it when the Environmental Protection Agency places heavy restrictions on coal-burning power plants.”

Because Coca-Cola and other soda manufacturers also sell diet drinks, juices, water, and other non-taxed alternatives, they apparently don't have an incentive to be "bootleggers", and thus Smith and Yandle conclude there are none, which is why they argue that soda taxes haven't gotten far politically.

In part they're right.  But, I think they're missing an all together different sort of "bootlegger" in the story.  Some baptists are bootleggers: they're one and the same.   

Yes, non-profits, public health advocates, academics, and bureaucrats often make appeals that seem virtuous and Baptist-like.  But, often their motives are less than altruistic.  

Consider the fact that almost every call for soda or fat taxes also suggests that the tax receipts should be spent on activities that would directly or indirectly benefit said groups.  Here for example, is Mark Bittman in the New York Times

“The resulting income should be earmarked for a program that encourages a sound diet for Americans by making healthy food more affordable and widely available.”

A New York Assemblyman, arguing for a statewide fat tax said the proposal should go foward

“as long as the revenue is directly targeted and used to address a healthy lifestyle, and not to fill a budget gap”

Yes, these programs might benefit people's health.  But, look at who else the earmarks also help.  Who will be paid to do the education, promotion, monitoring, etc.?  Moreover, the federal government already spends millions of dollars every year on dietary and obesity research, and surely many academics would benefit from increased budgets for research and education grants on obesity, nutrition, and health care.

I'm not necessarily saying this sort of research or education shouldn't be done, but what I am saying is that many of the Baptists in this case also have (perhaps not even self conscious) bootlegger-type motives.  As a result, its often hard to have thoughtful discussions about the economic justifications (or lack thereof) of fat taxes.  I think it was Upton Sinclair who said

“It’s difficult to get a man to understand something if his salary depends upon his not understanding it.”

GMO and Soda Votes

I have been keeping an eye on several ballot initiatives in yesterday's election.  Not all results are finalized, but here's what we know so far:

In Colorado, mandatory GMO labeling was defeated by a wide margin, 66% to 34%, with 93% of precincts reporting.

In Oregon, mandatory GMO labeling is very close and still up in the air.  With 88% of the votes counted, the "No's" are ahead by about 26,000 votes (659,404 to 633,132), giving the "No's" a current 51% to 49% margin. 

A vote in Maui, HI to ban cultivation of GMOs is too close to call

Berkeley, CA passed a soda tax (75% in favor vs. 25% opposed)

The majority of voters in San Francisco, CA favored a soda tax (55% in favor), but the initiative required a 2/3 majority to pass. Thus, the soda tax failed in San Francisco.  

Should the government regulate unhealthy foods?

That was the question asked in a long piece by the Congressional Quarterly Researcher a few days ago.  I had several nice conversations with Robert Kiener, the author of the piece, and was pleased he included a few of my thoughts.  

The article had a page (pg. 833) with alternative viewpoints responding to the question: "should the government tax sugary soda?"  Writing in favor was Michael Jacobson with the Center for Science in the Public Interest.  Writing in opposition was yours truly.  Jacobson repeatedly refers to "big soda's" talking points, but my views are my own and I have no financial ties to the soda or sugar industries.  I began by writing:

“Should the government tax sugared soda? It already does. Farm policies make U.S. sugar prices two to three times higher than elsewhere. Moreover, ethanol policies have led to a more than doubling of the price of high fructose corn syrup since 2005. Its no wonder that per capita sugar consumption has fallen precipitously over the last decade.”

You can read the rest for my other thoughts.  

On the sugar policy issue, I'll note this paper just released by Beghin and Elobeid in the journal Applied Economic Perspectives and Policy on the effects of sugar policy.  They write on the effects of the removal of US sugar policy.  They estimate the removal of the sugar program would lead to a roughly 30% reduction in the US price of refined sugar.  They write: 

“The removal of the sugar program would increase U.S. consumers’ welfare by $2.9 to $3.5 billion each year and generate a modest job creation of 17,000 to 20,000 new jobs in food manufacturing and related industries. Imports of sugar containing products would fall dramatically, especially confectioneries substituting for domestic inputs under the sugar program. Sugar imports would rise substantially to 5–6 million short tons raw sugar equivalent. World sugar price increases would be minor, equivalent to about 1 cent per pound.”

The interesting dichotomy (dare I say, irony) is that the ~$3 billion in consumer benefits estimated from the above study come about because of lower sugar prices that would arise if US sugar policy were eliminated. But, it seems sugar price advocates think just the opposite: rising sugar prices will somehow benefit consumers.  We can't have it both ways.  Either falling sugar prices help or hurt consumers.  I don't know about you, but I prefer paying lower prices.  

Food Fads and Fears

I've been reading the book Fear of Food by Harvey Levenstein.  It is a fascinating read, chronicling the history of food fears and fads that hit Americans in the 19th and 20th centuries.  I have a few quibbles with some of the material in the chapter on "Bacteria and Beef", but overall, good stuff.

One passage showed how at least one version of the Paleo diet had been advanced since the early 1900s for many of the same reasons it is advocated today, almost 100 years later:

“In 1920 Fleischmann’s urged eating its yeast cakes because ‘the process of manufacture or preparation’ removed from many foods the ‘life giving vitamine’ that provided the energy people needed. ‘Primitive man,’ it claimed, ‘secured an abundance of vitamines from his raw, uncooked foods and green, leafy vegetables. But the modern diet - constantly refined and modified - is too often badly deficient in vital elements.’”

Levenstein also chronicles the emergence of food scientists and nutritionists who often had significant effects on dietary fads and public policies.  It is remarkable the hubris with which many of these men made dietary advice and public policy, particularly because we now know they were often quite wrong in their scientific knowledge.  Whether it was Metchnikoff and Kellogg and their views on autointoxication and the merits of yogurt, or Horace Fletcher's method of chewing to "Fletcherize" food,  or Harvey Wiley and his war on benzoate of soda, or Elmer McCollum and his promotion of acidosis, or Russell  Wilder's belief that thiamine deficiencies would cause the nation to loose their will to fight the Nazis - there seems to be a continual stream of people willing to use scant evidence to promote their favored cause to promote public health.  Not just idly promote - but with often with righteous indignation and certitude of belief.  I have no doubt many of these men passionately believed the diets they promoted but that didn't ultimately make them right.  

Levenstein writes, in the midst of concern of lack of vitamin consumption in 1941, that

“The New York Times said, ‘The discovery that tables may groan with food and that we nevertheless face a kind of starvation has driven home the fact that we have applied science and technology none too wisely in the preparation of food.””

Unfortunately, something similar could be said about how applied science and technology have often been used none too wisely to promote various public policies and best selling books.   

It is true that science has progressed and we know more than we used to.  One of the things we've hopefully learned is that we often need to exercise a bit of humility.