There isn’t a single problem our society faces that The Des Moines Register editorial board doesn’t seem to believe government intervention can’t cure. This week’s problem is that Iowa is the 13th fattest state according to The Trust for American Health and Robert Wood Johnson Foundation. We also have a budget shortfall.
Their solution? Implement a sin tax on sugar. They write:
This state clearly has little aversion to so-called “sin taxes.” Throughout Iowa history, our lawmakers have embraced imposing levies on items generally considered harmful.
Iowa became the first state in the country to pass a tax on cigarettes when lawmakers added 2 cents to the cost of a pack in 1921. Nearly a century later, that tax is $1.36 per pack, compared with 17 cents in neighboring Missouri.
Cigarette taxes are proven to reduce smoking, an addiction that drives up health care costs and kills people. Meanwhile, Iowa reaps financial benefits, collecting about $230 million in fiscal year 2016 from taxing tobacco products.
And this state has no qualms about padding the public coffers with taxes on alcoholic beverages. Our levy on wine is nearly six times higher than Kansas‘ tax and generated $7.6 million in 2016. Beer sales brought twice as much money to state government.
A special tax on sugar-sweetened drinks and soda, which contribute to everything from obesity to cavities, is in keeping with Iowa’s other taxation to discourage unhealthy behaviors.
Of course the state Legislature is controlled by Republicans. Many recoil at the word “tax” unless it is part of the phrase “tax breaks for businesses.” But some conservatives have a special dislike of soda, even proposing to ban the purchase of it with food assistance benefits. And at least some of them must recognize the state is thirsty for revenue.
I see two basic problems with this solution.
1. Iowa has a spending problem, not a revenue problem.
It’s no surprise that the liberal editorial board would advocate a tax hike (or tariff or fee – as if we don’t recognize what it really is). The problem is ultimately not the state’s revenue, but we have a spending problem.
Many news articles quote high-spending legislators placing the blame on too many tax credits. It is wrong to assume the state gave away too many of Iowans’ dollars when the state actually took more from Iowa taxpayers than ever before! There are two parts to the budget creation process: dollars received, and dollars spent. Regardless of the structure of the current tax system, revenues still increased! And as we have witnessed over the past year, it is difficult to accurately estimate the total amount of dollars that the citizens and businesses of Iowa will ultimately owe and pay to the state. The spending of those dollars, however, is another story. While the 2017 legislative session produced a state budget that appears to be more fiscally responsible for FY2018, the ramifications from FY2017’s over-spending continue to linger.
There are many reasons Iowa’s income tax system should be reformed, including a need for simplification and predictability.
The state’s budget grows at a faster pace than our revenue. The solution then is not only to reform our income tax system but to practice fiscal discipline. John Hendrickson recently suggested priority-based budgeting.
Several states across the nation are struggling economically. States such as Illinois, Connecticut, and California are in fiscal turmoil. At this time, Iowa is more economically stable than our neighbors in Illinois, but we are starting to see some warning signs. Iowa’s problem is that we are spending too much.
To address spending, the Legislature should consider priority-based budgeting. In explaining priority-based budgeting Jonathan Williams, Chief Economist at the American Legislative Exchange Council, wrote: “Policymakers should consider adopting the priority-based budgeting model to determine how to provide core government services while rooting out waste and protecting against overspending. This approach was successful on a bipartisan basis in Washington State, saving taxpayers more than $2 billion in the process.”
There are plenty of things the state can do to address it’s budget woes long before we even consider a new tax or a tax hike.
2. A sin tax will not ultimately solve the problem of obesity.
Our obesity problem as a nation, and as a state, can’t solely be laid at the feet of sugary drinks. So what else are you going to tax? Anything with transfat? Enriched flour? Things with corn syrup? Where would it stop?
Are they not going to tax diet drinks because do they honestly believe sucralose or other artificial sweeteners are better for you than drinks with sugar? That’s debatable. (I personally recommend Stevia if you have to use an artificial sweetener.)
Not to mention that while there is a drop in people purchasing cigarettes, there are a lot of other factors that have led to a decrease. There is now a stigma attached to cigarettes, you see less smoking on TV, advertisements on TV are generally negative, medical disclaimers, public service announcements, etc.
But sure, the sin tax did it.
Also, have people stopped or reduced drinking beer or wine? No. What those taxes have hurt are Iowa’s craft beer and winery industry. If those taxes did anything it just encouraged people to buy cheaper beer and wine.
Besides, it isn’t a proper function of government to compel people to make lifestyle choices. Not to mention, in order to lose weight you have to have some inner motivation. External pressure never works in the long run.
So a sin tax on sugar is just about revenue, let’s not pretend otherwise.