Health care reform bill needs sin taxes 
October 22, 2009 by Nathan Warner
Charging those with unhealthy habits is more fair than any alternative
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One idea being tossed around in the current chaotic debate on health care is to instate a “sin tax” on unhealthy behaviors.
This idea is not new — it has been endorsed and legislated worldwide for things like smoking and gasoline use. These Pigovian taxes (after economist Arthur Pigou) are intended to correct negative market externalities, unwanted consequences of economic activity that are experienced by unrelated third parties and in inefficient markets.
For example, all of humanity is affected by the environmental degradation inflicted by use of carbon fuels. But the incentive to drive less and thus contribute to less air pollution is, on the aggregate – nonexistent.
There is no incentive for any single individual to drive less — it is too much of an individual sacrifice. And it simply won’t make a difference if the rest of society doesn’t also change driving habits.
To rectify this, a high tax could be levied on gasoline. This would not explicitly prohibit driving but would decrease the total number of hours spent driving across society, thus lessening carbon emissions.
In other words, the externality would be corrected. Drivers would be made to internalize the full consequences of their decisions – even those that affect others.
The same concept has been suggested regarding other “sin” behaviors — actions that are entirely logical at the individual level but force high costs on unrelated parties who have no influence or choice on the action.
One obstacle to passing any substantial health care legislation that would redistribute costs is how to deal with obesity. The Wall Street Journal reported this summer that the total costs of treating obesity-related diseases ballooned to $147 billion in 2008 —about nine percent of all U.S. medical spending.
The Centers for Disease Control and Prevention estimates that 50 percent of these costs are paid by government programs, including Medicare, Medicaid and Social Security for those disabled by morbid obesity. There is no question that these “diseases of affluence” are a major public health problem in the developed world.
Most Americans who agree that the government should somehow contribute to a new health care system have no problem with higher taxes to fund it. The idea is that all of society would contribute more to government, which would provide or subsidize health care for all.
The problem is that any government-sanctioned system must find a way to deal with the negative effects that poor individual health decisions have on the entire society.
People who take care of their health — by eating healthy food in moderate amounts and exercising — are making personal sacrifices in order to be healthy.
Why, then, should this group pay more taxes to subsidize the treatment necessitated by the many, many health problems caused or worsened by obesity?
Of course, even those who consciously take care of their health can have health problems. These are the illnesses that health insurance (government or private) should pay for. It seems immoral to charge those who exercise self-discipline to stay healthy in order to pay the exorbitant and preventable health costs of those who don’t.
There are many contributing causes of obesity. Among them are other health issues that prevent exercise and lead to weight gain. It also appears unethical to attempt to establish some type of weight or health benchmark to use to charge higher premiums or taxes.
To resolve this moral conflict, the government should levy sin taxes on poor food choices. This policy has already been pursued to some degree with regard to smoking.
Smokers pay increasingly high taxes on tobacco products, which are set to discourage smoking and generate revenue to help pay for the public health costs of smoking, like Medicare and Veterans” Affairs treatment costs.
This same concept should be applied to unhealthy behaviors that lead to obesity and the many associated health risks.
This approach has many advantages. For one, it does not discriminate against obesity as a condition or a benchmark. The sin tax would discourage unhealthy behavior across the board and would thus attack the process of becoming obese and unhealthy, rather than judging someone’s condition.
Another benefit of sin taxes is the potential assistance for lower classes. The poor have a higher incidence of obesity simply because unhealthy food is cheaper than healthy food.
The revenues gained from a tax on nutritionally deficient junk should be used to subsidize healthy food. This transfer of incentives would create an easily calculated individual incentive to watch one’s weight.
Libertarians will argue that such policies are another example of unwelcome government intrusion. As one conservative friend exclaimed, “Stay the **** out of my groceries!”
To some extent, I agree. People should be able to purchase and eat whatever they want, even if their choices are slowly killing them.
But one’s health is not entirely removed from the public sphere. Rare is the individual who can pay for all of his own health care.
Even those who are happy with their private insurance plans and want no further government intrusion will likely someday end up on the government’s tab, through Medicare or another government program.
In other words, people should be free to slowly kill themselves if they agree that they should not seek any public health care for the consequences of those choices.
Even if no further health care legislation is passed, it is time for all citizens to see and feel the real costs of their poor choices and stop passing on their consequences to taxpayers.
The government should enact junk food taxes immediately to correct the skewed incentives to ignore one’s health.
Nathan,
Why would you force people to change their behavior when you could give them incentives to change? The safeway health care plan gives people who eat right, exercise, don’t smoke, etc lower premiums in their healthcare. This gives the same motivation but it still allows choice unlike the “Sin” taxes you talk about. This has also been proved to actually reduce health care costs.
You say that people would “internalize the full consequences of their decisions – even those that affect others.” I highly doubt this. Most people will just be mad because they can no longer drive to work and drive thier kids to school. Or they will be mad because the junkier food is all they can afford (as it is usually cheaper than “healthy” food)
Finally, where would it end? If a politician can tell me how much I can drive and what I can eat, what’s going to stop them from telling me what job I should take or how many kids I can have (as liberals keep telling me that if you have too many kids, you’ll be contributing to global warming), or if I can eat meat (seeing as lifestock accounts for 18 percent of all green house gases)?http://abcnews.go.com/Technology/GlobalWarming/story?id=2723201&page=1&page=1#.
I think that it is a very slippery slope that would destroy all that’s best in America if we went down it.
David, thanks for your input.
However, it seems you missed the entire point of my argument. These taxes would still allow free choice, and yet would still, as you put it, give them “incentives to change.” Yes, allowing breaks on lower premiums is also another way to encourage the same behavior, but it’s much more difficult to judge one’s actual performance in living a healthy lifestyle. How do you prove that someone has been eating well and exercising, if they are still overweight? Do you take their word for it? This plan would provide incentives to healthy behavior itself. It is easily implemented, and comes without value judgments of a person’s wellbeing or condition. It attacks known unhealthy behaviors, much like smoking.
As far as your second point, perhaps people would be angry that they couldn’t eat poorly. That’s entirely the point. And I did address the relative cost of unhealthy food as opposed to healthy food. You’ll notice above I discussed one advantage of this policy would be to use the proceeds to subsidize healthy food, thus switching the relative costs of the two opposing categories of goods.
Finally, your “slippery slope” argument is a classical logical fallacy, and is plainly and patently wrong. First, I explicitly stated that no politicians would set or legislate explicit limits on unhealthy activities. As I write above, “People should be able to purchase and eat whatever they want, even if their choices are slowly killing them. ” Second, the logic itself does not hold up to scrutiny. These taxes would strongly discourage unhealthy behaviors that negatively affect society. They would have no bearing on personal decisions such as your occupation or family decisions. (However, I might also add that governments across the world, including in this country, have used various means to encourage more people to pursue certain occupations or have more/less children.) But the tack of encouraging socially optimal behavior or discouraging socially suboptimal behavior is nowhere near the same as government commands.
Hi Nathan,
I disagree that the “sin taxes” allow free choice as it puts a negative monetary amount on an action. Meaning that if I make $30,000 a year and I was used to paying 5 dollars for lunch and all of a sudden that same meal costs $15, I am being forced to change. I would have a finite amount of money and I need to be fed, so I’ll be forced to: eat less often (1 lunch every 3 days) or find something to eat in the $5 range or find a way to earn more money. As it is not that simple to just earn more money that leaves only the first two options. Either way I would be forced to change my behavior because of my lack of money while rich people would not. This also brings up the problem of only forcing poor and middle class people to change their behaviors while the rich will still be free to decide if they want to change how they eat.
My argument for decreasing premiums based on healthy decisions was based on my understanding of the plan that Safeway uses in its company. I unfortunately do not know how they measure everything though I do know that they have used their system to lower their overall health costs as well as improve people’s habits. Smoking is one of the changes that will give you a lower premium in their plan.
Second, who are we to say what is healthy eating and what is not? Not even the government and their nutritionists can decide as they just changed the food pyramid in 2005, which is the foundation of what they consider a healthy way of eating. Subsidizing healthy food with the profit from the unhealthy food is a flawed argument as shown above. If a person only has $5 per meal and the price goes up to $15 then most people will not eat it thus there won’t be a lot of money earned off of it from which to subsidize the healthy food.
You also only focus on only one part of healthy eating which is limiting junk food. Even if healthy food is cheaper I doubt many people will eat it as they are not used to it and much of it tastes strange at first. So the “sin taxes” will only limit the amount of people eating junk food but it won’t change the amount of people eating healthy food.
Third, I think you must not look at history much when saying my argument is “plainly and patently wrong.” Just about everything that the government does is originally limited (ex. social security, Medicare, Medicaid, SCHIP, EPA, FCC, FDA, etc) and then grows. So even if there are “explicit limits on unhealthy activities” I don’t believe that it will stop with those as it is as easy as a vote of Congress to change everything.
My other point is that once the government has decided to control what I eat, what is going to stop them from branching out into other areas that are potentially unhealthy? Nothing. The Democrats loved to bash Bush for his secrecy and accumulation of power but when Obama, a democrat, won the white house did he give that power back? Nope, he is acting the same and he is actually increasing the power of the president. Politicians and the government rarely give back power once taken.
I know that governments have used means to encourage people to take certain occupations or have more/less kids. Giving a grant or scholarship to pursue a certain occupation is very different from telling me what I will do as the Soviet Union did. Forcing people with heavy penalties like China is not a power I think any government should have. Just because a government has had that power in the past does not mean that it was a good idea.
I know that the “sin taxes” is not the same as the government telling me where to work or how many children to have but that is the meaning of a slippery slope. We give the government power in one thing and then the government takes power in other things. All they need is someone to say that having too many children is unhealthy and now they can regulate how many children I have. All they have to say is that my occupation is unhealthy and I’m now out looking for a new job. That is far too much power for a government to wield and these “sin taxes” will be the beginning.
David-
You say:
“I disagree that the “sin taxes” allow free choice as it puts a negative monetary amount on an action. Meaning that if I make $30,000 a year and I was used to paying 5 dollars for lunch and all of a sudden that same meal costs $15, I am being forced to change. I would have a finite amount of money and I need to be fed, so I’ll be forced to: eat less often (1 lunch every 3 days) or find something to eat in the $5 range or find a way to earn more money. As it is not that simple to just earn more money that leaves only the first two options. Either way I would be forced to change my behavior because of my lack of money while rich people would not. ”
This is exactly his point. You have the choice of either paying for a more expensive unhealthy meal or a subsidized and therefore less expensive healthy meal. Changing your behavior is the motivating factor behind the “sin taxes”. If it didn’t cause you to change your behavior, or at least consider changing your behavior, then it would be pointless. We have laws and fines that function the same way. For example, I tend to speed when I drive. I can get away with it for a while, but on occasion I receive a speeding ticket, which is a deterrent to my bad (and illegal) habit of speeding. Do I personally think speeding is bad? Not really. Does the fine I have to pay motivate me to follow the speed limit? Absolutely.
Here’s my second point: Could a rich person pay more speeding tickets than me and therefore get away with this bad habit more than me? YES!
That’s part of the reason why the “rich people vs. poor people” argument just doesn’t resolve any issues or make any point here. It’s simply fact that rich people are going to have less limitations. I’m “forced” to by a cheap car that breaks down all the time because I have less money. I’m “forced” to stick to hot dogs and corn while some rich guy probably dines on lobster and truffles every day. Even without any kind of “sin taxes”, the rich guy can buy whatever car he wants and eat whatever food he wants. Is it fact? Yes. Is it fair? Well, that’s another argument for another day.
The ultimate goal of the sin taxes is to encourage people to eat healthy food and thus reduce the financial burden of the unhealthy food-related diseases on our health care system. Rich people typically aren’t a burden on the health care system as it is- they can pay for their own health care. Poor people, however, cannot typically pay for their own health care and rely on government sources. Who should be regulated? The people who are feeding from the system. A sin tax that causes behavioral change in poor people (who tend to use the system) and not in rich people (who tend to pay for their own health care) is actually quite logical.
As I stated before you don’t really have much of a choice when the price is forced higher as you only have a limited amount of money and thus can only buy a finite amount of things. You would actually have a choice if you lower health care premiums like the Safeway plan based on improving your health. That way anyone could choose to do it or not. No force. It would just be an option. While increasing the cost of food affects everyone, not just those who want to be affected. That is the difference I’ve been trying to point out.
You are not forced to speed. It’s a choice, as not everyone has to speed. Some people drive the speed limit on purpose and so they are not affected by speed limits. So this is closer to my example of health care premiums than to increasing food taxes that affect everyone.
You are not forced to buy a cheap car. You could not buy a car at all and ride a bike or use the bus. You could save up for years and get a more expensive car. You could get a better job so you could afford a better car. So in no way are you forced. You are not forced to eat hot dogs and corn as you could not eat either of them. You could work two jobs and use the extra cash to pay for other foods, etc.
We do agree that with these taxes the only people getting hit will be the middle class and the poor.
For the sin taxes to only “encourage” it would allow people to decide whether to pay more for their “junk food” or not. As that is obviously not the case, as no one would do that it is most definitely force.
We also agree that poor people tend to cost the government (us, taxpayers) much more than rich people. Why does that matter? That just shows that there is a problem not that we should force them to change. You ask “who should be regulated?” I would say businesses much more than individual people. The government should have no say in what I eat or don’t eat. It should focus on those matters that it actually has constitutional authority to perform (ex. Article 1 Section
This is the problem w/ your argument:
How much would we charge for the sin tax? If we make it too small it will have no effect as people won’t notice it. If it’s too large people will be forced to sacrifice and may not be able to afford any food.
And is it the foods fault your fat or is it your fault? If you create a sin tax you are taxing everyone…even the healthy. Is that fair? It’s the exact oppostive of the healthcare costs you mentioned in your article. You asked, is it fair that healthy people pay higher taxes to fund healthare costs for the unhealthy and you say no….but isn’t it just as unfair to tax the healthy people for buying a soda every now and then because there are some that are addicted to it? I say no.
This is what the left does. Instead of putting the blame on the actual people for making bad decisions..you try to place the blame on a bottle of soda or a hamburger, profit, and big business of course. Thats why you want to tax the bottle of soda and not the person who it is actually making the bad decisions.
If you want to create a sin tax…TAX THE PEOPLE COMMITTING THE SIN!!!
I was thinking about this and I have a question for those wanting to back “sin” taxes. Would you support it if the “sin” taxes were put on a product that kills at least 75,000 people in the US per year and the third most preventable cause of death in the US ? That sounds pretty harmful to me.
Well that product which mostly likely you know by now is alcohol. If we pushed the price of beer to $50 per bottle or can then most people would be forced to not drink alcohol and so many of those 75,000 people per year would be saved (though I think the number is much higher as it only includes deaths by car accident or alcohol realted disease. It doesn’t include domestic violence or birth defects, etc.)
http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5337a2.htm
I think that this is one of the biggest problems with the “sin taxes” arguement as they only talk about some “bad” foods. If the law were to be fair then it must include all bad foods. As I don’t drink, it wouldn’t bother me if alcohol was taxed but as I think that these “sin” taxes are not helpful and give way too much control to the government, I would fight those taxes as well.