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How to Think About Public Health Taxes

By Matthew Yglesias  

"How to Think About Public Health Taxes"

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I don’t know anything about Will Saletan’s article “Sweet Surrender: Taxing soda to make you stop drinking it” other than the title. But I do know the title, and I don’t think that’s the right way to think about the case for taxing soda.

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Think about the case for taxing income, via the income tax and FICA. Why do it? Well, to get the money. That’s how we finance Social Security, the Department of Defense, Medicare, interest payments on the national debt, Medicaid, federal aid to schools, veterans’ health care and benefits, the FBI, etc. Now what’s the case against taxing people’s income? Well, it’s that it discourages work and it discourages investment. And that’s bad for the economy. Now we go back and forth over whether any given expenditure has a value that outweighs the economic costs. Liberals, like me, tend to think that a relatively high level of expenditure is justified whereas folks on the right tend to disagree.

But what if we could raise some revenue by taxing something else? Like, say, cigarettes. Or soda. Or booze. Well, then the case for doing the taxing remains similar—you can fund useful programs with it. But the case against looks a lot weaker, since reducing consumption of cigarettes or soda is not so bad. You introducing a little bit of allocative distortion into the economy, but not a huge amount, and you’re improving public health which is going to be beneficial.

There are limits to how much you can raise through these kinds of methods before you create problematic black markets. But at the margin, it makes sense to try to raise revenue through taxing environmental and public health hazards rather than, say, FICA or the ten percent income tax bracket.

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