Tuesday, March 16, 2010

But if They Don't Buy it, There will be Less Revenue

I was listening to the radio this morning and the politicians in NY discuss the importance of a tax on sugared beverages. Basically a soda tax.

It was put forward that NY needed the money this tax would generate. And if this tax wasn't passed then that multi-million (or maybe billion - I wasn't listening that closely) gap would have to be made up another way. So it was imperative for the financial health of the state that this tax be approved.

But these same politicians seemed to have a secondary reason why it was so important to pass this tax. People are fat. And getting fatter. And soda isn't good for them. So a tax will help to keep them from drinking as much soda. It will make them healthier and thinner and the world will be a better place full of rainbows and unicorns (okay, I added that last bit.)

Now, is it just me, or is there a problem with this model? If you desperately need the money, but your tax is going to alter behavior so that not as much of the product is sold - won't that eat into the proposed tax revenue?

Good thing I'm not a politician or an economist. I think my head would explode!


kkolshorn said...

Actually, some of this does make sense. Look at smokers as an example. You do have plenty that have quit and I know many that quit because cigarettes were getting so expensive with the raising tax on them. There is though a huge population that won't give it up. These are those idiots that you see outside restaurants and bars on a freezing night. There are enough of them that you can still make good money on the tax, but you also will have some that quit. The same model should hold true with the soda, and that is how they are making both claims.

Sarah Rettger said...

As an ex-econ major, I'm not up to much of an explanation either - except to assume that they don't think it will have the desired effect right away. (And also to speculate that they're pretty desperate in the New York state government right now, and will take rainbows and unicorns and a balanced budget any way they can get it.)

Also, your post reminded me of this piece from Morning Edition yesterday. For what it's worth.

Jim Danielson said...

Chris, you've hit accidently on why it will work -- NY already has a high tax on unicorns and raunbows!

Jim Danielson said...

....and bad spelling.

That would be "rainbows"