Alabama Gov. Robert Bentley (R) is trying to convince lawmakers to add a 5-cent tax to the price of a can of soda to help fill a $200 million deficit in the state’s budget.
Cameron Smith, a senior fellow and state programs director with the R Street Institute, says the sin tax is Bentley’s “plan B” if lawmakers reject his proposal to remove the state’s tax deduction for federal payroll taxes.
Plan B for the Budget
“Most recently, Bentley has introduced, through his finance director, a beverage tax that would apply to soft drinks and other sugary beverages,” Smith said. “It would not apply to water and milk. It would raise about $182 million.
“The governor’s office has said they don’t intend to push the tax, but they wanted legislators to have that option instead of removing the FICA deduction,” Bentley said. “It’s an either-or situation being presented by the governor’s office.”
‘We Want More Money’
Smith says Bentley is not pretending the sin tax is anything other than a cash grab.
“This isn’t about, ‘We really care about public health and safety,'” said Smith. “This is, ‘We want more money; where can we get it?”
Smith says sin taxes are often proposed to coerce consumers into making different lifestyle choices, but they rarely work as designed, and such an effect isn’t even intended in this case.
“You have to look and say, ‘Well, what’s the actual impact? Will this stop or change behavior?'” Smith said. “In terms of the economic impact, I don’t think the tax rate will necessarily alter consumption, which I think is a bigger problem with the tax.
“If the tax is justified as a matter of public health, for example to prevent obesity or reduce the harmful impacts of sugary drinks, then you would need something that would change conduct, and I don’t see this as changing conduct,” Smith said. “At the same time, it’s a tax. It’s an economic drag. It’s an imposition that’s an externality that’s not part of the market.”
Adam Hoffer, an assistant professor of economics at the University of Wisconsin-Lacrosse, says sin taxes are political shortcuts for padding budgets.
“There’s something about taxing soda, or the traditional discouraged goods like alcohol or cigarettes, that is a little more palatable to voters, because the underlying principle there is, ‘Well, if we discourage consumption of these things, then voters might not mind so much,'” Hoffer said.
Regardless of the intentions, Hoffer says the proposed sin tax will not help Alabama taxpayers.
“It’s clearly taking more money out of the pockets of Alabama consumers,” Hoffer said.
Elizabeth BeShears ([email protected]) writes from Trussville, Alabama.
David R. Just, et al., “From Coke to Coors: A Field Study of a Fat Tax and its Unintended Consequences,” Journal of Nutrition Education and Behavior: https://heartland.org/policy-documents/coke-coors-field-study-fat-tax-and-its-unintended-consequences/