There are basically two schools of thought on the purpose of the tax code. One is to raise revenue to fund the essential functions of government, whatever those may be. The other is to use taxes as a carrot and a stick, rewarding behaviors the government finds desirable and punishing those that it doesn’t. America’s founders, the architects of the original tax code, would have found this second function, in which taxes are used for social engineering, unthinkable and against the very nature of the limited-government power structure they proposed. And yet controlling people’s behavior has become an increasingly important function of tax policy, despite its implications for individual freedom and independence.
This is the rationale behind the soda tax. It is asserted that America is undergoing an obesity “epidemic,” an insulting use of the term that falsely analogizes personal lifestyle choice to disease. It is therefore assumed that it is the responsibility of the government to “cure” the disease of people consuming too much sugar and fat.
This used to be an idea that was only proposed by meddling Democrats who think their mission in life is to tell other people what to do. Sadly, that appears to be the case no longer, as a soda tax proposal taking hold in West Virginia is being pushed by Republican lawmakers.
The proposed tax would charge five cents for every 16.9 fluid ounces of soda sold, a tax that would be split between consumers and retailers depending on how strong the demand. Five cents may not sound like much extra to pay, but consider that it represents a 400 percent increase on the rate at which soda is currently taxed. Additionally, two other bills have been introduced in the West Virginia legislature that would increase soda taxes a further one and two cents respectively.
One could argue that these incremental increases in price won’t actually have an effect on consumer choices, but both logic and empirical evidence contradict that claim. At any price, there are presumably some people who are already paying as much as they are willing to pay for soda. Increase that price, even a little bit, and they will substitute a more affordable beverage. It is these marginal consumers who account for the changes in the quantity of goods demanded when prices change. Evidence in cities where soda taxes have been specifically levied has shown us that higher prices do result in less soda sold.
For example, in Philadelphia, where the government imposed a 1.5 cent-per-ounce tax on sodas, distributors reported a drop in sales of between 30 and 50 percent that would potentially force layoffs. If this sales shock seems disproportionate to the amount of tax levied, it’s important to remember that there is a psychological component to consumer behavior as well as a financial one. Where I live, in Washington, D.C., the government levies a five-cent tax on plastic bags used at grocery stores. Almost everyone can afford an extra nickel added to their grocery bill, but many people have changed their behavior anyway, not because of the money, but because they don’t like the idea of being taxed any more than they already are. The same phenomenon is no doubt in effect in Philadelphia and would be evident in West Virginia as well.
There are lots of reasons to oppose a soda tax. Personally, I object to a central authority trying to modify citizen behavior, as if we are rats in a laboratory cage. But for those more pragmatic than I, another objection is the cost to the economy of making consumption — or, to be more accurate, the production that drives consumption — more difficult. Even without changes in consumption, the proposed tax would suck $75 million out of the economy each year, according to the Tax Foundation. Combine that with the layoffs and general decline in economic activity, and you’re looking at some serious harm to West Virginia, a state that already struggles economically.
Finally, there’s the fairness argument. Soda taxes have repeatedly been found to be regressive, meaning that they fall hardest on those Americans with the lowest incomes. “Tax the rich” may be a persuasive populist sentiment, but since when is “tax the poor” an equally good substitute? How about instead, we live within our means and don’t try to use the tax code for social engineering? Republicans in West Virginia need to get back to their roots and remember that conservatism is all about personal autonomy, limited government, and a nation in which individuals are free to choose.
This article originally appeared on Conservative Review.