The Tax Conundrum

tax2Childhood Obesity News has been tracing some of the developments in efforts to offset the public cost of the consequences of obesity by levying tax on soda pop, junk food and fast food. Relevant to this, a recent New York Times article by Dariush Mozaffarian and David S. Ludwig quoted Dr. Kelly Brownell, Dean of Duke University’s Sanford School of Public Policy. Brownell wrote:

I expect history will look back with dismay on the celebration of baby steps industry takes (such as public-private partnerships with health organizations, ‘healthy eating’ campaigns, and corporate social responsibility initiatives) while it fights viciously against meaningful change (such as limits on marketing, taxes on products such as sugared beverages and regulation of nutritional labeling).

Of course it is difficult to force any aspect of the food industry to change its ways or curb its enthusiasm for ever-increasing profits. America was built on the ideal of freedom, and businesses never hesitate to claim their share of it.

One of the main reasons behind the drive to add a “sin tax” to the price of any product that is harmful to people is the collection of revenues that, in theory anyway, are used to alleviate the cost of medical care to people who develop diseases because of the product. But any citizen who follows up on the result of such movements is likely to feel discouraged and betrayed.

Broken Promises

At one point, the tobacco industry was made to pay a $246 billion dollar settlement to be shared among state governments and doled out over a 25-year period. A couple of years ago, National Public Radio looked into how that money is spent, and what it found was not good. Rather than use it for preventative education, cancer research, or the actual care of patients, states have funneled the settlement funds into whatever seemed needful at the moment—literacy programs, road work, and even financial assistance for tobacco farmers.

Attorney Mike Moore, who was instrumental in winning the case against the tobacco companies, told NPR that “most of the settlement money came with no strings attached, and that has made it impossible to hold states accountable.” In Mississippi, for instance, Moore described the situation like this:

What happened as the years went by, legislators come and go, and governors come and go…so we got a new governor and he had a new opinion about the tobacco trust fund. So a trust fund that should have $2.5 billion in it now doesn’t have much at all…

With this kind of precedent, it is no wonder that voters are leery of tax proposals. A second justification for adding a “sin tax” to the cost of products is to steer shoppers away from buying them. A report from examined the psychological effects of this idea. A study conducted by Cornell University and RTI International found that one-third of consumers were not aware of the tax status of products they bought. While it is true that many or most grocery chains include tax information on the receipts, consumers do not routinely study those receipts or make use of the information they gain from giving the matter such attention.

The researchers suggest that instituting the tax at an earlier stage, by imposing it on manufacturers, wholesalers, and distributors, might be effective. That would make the full, true price of the item appear on the store shelf signage, rather than in the pale obscure numbers on the long strip of paper stuffed into the bag at the end of the transaction. But for now, their summary stated:

Increasing sales taxes on sugary foods to promote healthier food choices among grocery store shoppers is unlikely to be effective because many consumers are unaware of the tax differences on food items sold in grocery stores.

Your responses and feedback are welcome!

Source: “Why Is the Federal Government Afraid of Fat?,”, 07/09/15
Source: “15 Years Later, Where Did All The Cigarette Money Go?,”, 10/13/13
Source: “States aiming to promote healthy eating through sales taxes often miss the target,”, 12/18/12
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