Taxing Sugar Will Do More Harm Than Good
Freedom for taxpayers and consumers is the answer, not more taxes and regulations
March 30, 2012
The endless list of things that allegedly have to be regulated in the name of the public welfare has a new member: sugar. Some public health experts are claiming that sugar should be taxed and regulated like alcohol and tobacco in the name of public health.
I agree that people are probably eating too much sugar. I have no reason to doubt the clinical analysis documenting sugar's pernicious effects. I have serious reasons to doubt the implicit economic analysis underlying the claim that sugar should be taxed and regulated like alcohol and tobacco. I agree: There's probably a problem. I don't think taxes and regulations are the right way to address it.
University of California-San Francisco School of Medicine professor Robert Lustig and his co-authors [including Laura Schmidt] claim that Americans lose $65 billion in forgone productivity and spend $150 billion treating "morbidities associated with metabolic syndrome." This is only a social problem and a public policy issue if those costs are external, meaning that they spill over onto others. If they are private costs, then they are irrelevant to the argument for taxes and subsidies.
Here's an example. I eat too much junk food (I'm trying to change that). If my productivity is lower as a result, then I will have lower earnings. The lost productivity will be fully reflected in a lower income. If I'm the one who bears the full cost of my bad decisions, then there is no reason to step in and interfere with my choices. In a free country, you have the right to disapprove. But in a free country, you don't have the right to bend my choices to your will by force.
At this point you're probably tempted to respond that these are external costs. You might claim that taxpayers spend money through various government health programs like Medicare and Medicaid (and will spend even more money under the new healthcare law) as a result of others' bad health decisions.
You're absolutely correct. This isn't an argument for regulation and taxation, though. You're pointing out that the public health infrastructure has given people perverse incentives. The problem comes not from the sugar consumption per se, but from the fact that we have created a system of healthcare subsidies that has given people powerful incentives to make bad health decisions. I suspect that these were enacted with the overwhelming support of a lot of the same people who now want to tax and regulate sugar.
This is the law of unintended consequences in action. When you change people's incentives, you change their behavior. When you give people incentives to make more bad decisions, they will make more bad decisions.
Even if we grant that taxes and regulations might be justified in theory, this doesn't mean they will work in practice. I expect them to suffer the same fate as other well-intentioned policies: They will be contorted by the political process and end up doing more harm than good.
Here's a final problem. The government subsidizes the production of the kinds of foods that are killing us. A September 2011 report from the U.S. Public Interest Research Group Education Fund offers a helpful comparison. If subsidies were given directly to consumers, every taxpayer would get "$7.36 to spend on junk food and 11 cents with which to buy apples each year—enough to buy 19 Twinkies but less than a quarter of one Red Delicious apple apiece." It's time for this madness to end. Freedom for taxpayers and consumers--not more taxes and regulations--is the answer.