Special Interests Mobilizing Against Taxing Health Hazards

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As the Senate Finance Committee continues to look seriously at the idea of raising taxes on alcohol and commencing taxation of sweetened beverages, it’s natural that the industries that would be adversely impacted by such taxation are mobilizing lobbyists and astroturf to beat the ideas back. But what’s fascinating about Alan Fram’s account for the Associated Press is that nobody from the special interest community seems to have any actual arguments on the merits as to why this is a bad idea.

To step back and consider the issue, consider that any time there’s a push for higher taxes there are basically two kinds of arguments you can make. One is simply the fact that everyone would rather pay lower taxes rather than higher taxes, so you can always find someone to complain about being asked to pay more. But the other kind of argument is that higher taxes can have genuine deleterious effects on the economy. Advocates of eliminating the estate tax, for example, attempt to argue that the estate tax is a major barrier to capital formation, business expansion, and therefore job expansion. I don’t buy that argument, but you can see a clear connection between the argument and the policy outcome. A tax that badly hurt job growth would genuinely be a bad thing. A tax on public health hazards isn’t like that. It’s true that reduced alcohol consumption would have an adverse impact on jobs related to the production, sale, and distribution of alcoholic beverages. But by the same token, the funds spent on alcohol wouldn’t just be set on fire—reduced booze consumption would be offset by increased consumption of things that aren’t alcohol and by increased savings. Meanwhile, excessive alcohol consumption is associated with a lot of help problems, and not only problems for excessive drinkers—drunk driving and the linkage between alcohol and violence impose significant costs on other people. Mark Kleiman estimates that “Doubling the tax on beer (from a dime to twenty cents a can) would reduce the assault rate by at least 5%, and maybe as much as 20%.”

Meanwhile, you could get a healthy chunk of the revenue needed to pay for health care reform. All else being equal, of course, I’d like to see everyone pay low taxes for everything. I don’t want my beer to get more expensive. But at the same time, I do want to see comprehensive health care reform. So someone will have to pay something. And this is a pretty good option. The fact that the people who sell and market this stuff don’t want to pay the tax is, politically, a crucial fact. But on the merits it’s neither here nor there. Policymakers aren’t supposed to be serving the interests of the guys who make Coors Light ads or who make a living by selling an addictive substance to people with a serious problem.