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Mayo doctors propose higher — and new — ‘sin taxes’

cigarette photo
Mayo anesthesiologists Dr. Michael Joyner and Dr. David Warner propose increasing current taxes on alcohol and tobacco and implementing new taxes on fatty foods and sugary beverages.

Two Mayo Clinic physicians have joined the growing ranks of health professionals who believe we should be using our tax codes to help change behavior and improve health.

In a provocative commentary published in the June issue of the journal Mayo Clinic Proceedings, anesthesiologists Dr. Michael Joyner and Dr. David Warner propose increasing current taxes on alcohol and tobacco and implementing new taxes on fatty foods and sugary beverages.

The taxes would significantly lower the burden of alcohol-, smoking-, and obesity-related disease in the United States, they write, and the extra revenue could be used to fund a variety of health-promoting projects.

Such so-called sin taxes are “thoroughly American,” they add.

Improving physical health

In support of their argument, Joyner and Warner point out that research has already shown a direct relationship between price and the use of alcohol and tobacco.

The higher the cost of these products, the greater the deterrent.

“It is estimated that doubling the tax on alcohol would reduce alcohol-related mortality by about 35%, traffic deaths by 11%, sexually transmitted disease by 6%, violence by 2% and crime in general by 1.4%,” they note. “For cigarettes, a 10% increase in cigarette prices typically reduces consumption by 4%.”

The doctors acknowledge that evidence in support of taxes on sugary and fatty foods having a similar positive health effect is “less well developed.” Furthermore, to be effective, such taxes would probably have to be quite high — in the range of 20 percent for sugary beverages.

“Nonetheless, given the important role that consumption of these beverages plays in the obesity epidemic, the potential health benefits justify further exploration of this possibility,” they write.

Improving fiscal health

Sin taxes would generate considerable revenue: $80 billion over the next 10 years if the tobacco tax were increased by 50 cents per pack, and $250 billion over the same period if the alcohol tax were  increased to 30 percent of the pretax value of the beverage (from the current 10 percent), according to Joyner and Warner.

In addition, imposing a 1-cent-per-ounce tax on sugary beverages would raise at least $15 billion per year, and a similar tax on high-fat food would generate about $12 billion per year.

The doctors base the latter number on Denmark’s experience with a fatty-food tax, which generated about $200 million (among a population that is 1/60th the size of that of the U.S.) during the one year it was in existence. That Danish law was repealed last fall (and another tax on sugary foods was not implemented), however, due to complaints from consumers and businesses alike. (Danish shoppers could — and often did — avoid the higher tax by buying products in bulk in neighboring countries.)

Many potential uses

In total, say Joyner and Warner, the four sin taxes would add up to about $600 billion of increased U.S. revenue over 10 years, which, they point out, “is a substantial fraction of the increase revenue being discussed as part of the current political negotiations over the federal budget.”

That money could be earmarked, they add, to buffer fiscal pressures associated with Medicare and Medicaid, to build federal programs and infrastructure that encourage physical activity, and to fund needed medical research.

If politicians can be made to keep their hands off it, that is.

“Given the past behavior of governments, which for example have largely diverted the revenue streams from the Tobacco Master Settlement Agreement from funding tobacco control efforts to other purposes,” write Joyner and Warner,  “sustained political pressure will be required if these additional revenues are to be invested in health over the long term [versus] used for general revenue.”

‘Deeply’ American

According to the doctors, taxes on alcohol, tobacco and unhealthful foods should be attractive to people on both ends of the political spectrum. The taxes should appeal to liberals because they help promote behaviors that reduce socioeconomic and racial health disparities. But they should also appeal to free-marketers.

“From a market perspective,” the doctors write, “the Pigovian tax argument that individuals who engage in behaviors that increase costs to society in the form of increase medical costs should bear an increased individual responsibility for funding these costs should also be attractive to conservatives.”

Sin taxes are also surprisingly American, as Joyner and Warner also note:

 [They] are deeply imbedded in the history of the United States and from its beginnings have provided a major source of government revenue. For example, until the 18th Amendment to the US Constitution prohibiting most personal use of alcoholic beverages took effect in January 1920, alcohol taxes were the single largest component of internal revenue for the federal government, accounting in 1910 for 71% of all internal revenue and 30% of overall federal revenue.

Indeed, Prohibition would not have been fiscally feasible without the institution of the personal income tax in 1913 through the 16th Amendment, and contemporary politicians argued that the repeal of Prohibition in 1933 by the 20th Amendment was accelerated by the need for additional tax revenues. Thus, the concept of increasing or levying novel sin taxes to benefit society is a thoroughly American practice that should not be foreign to those with even a passing knowledge of US history.

Minnesota raises tobacco tax

In May, the Minnesota Legislature increased the tobacco tax by $1.60 a pack, raising the total tax on a pack of cigarettes to $2.83 (starting July 1). Anti-smoking groups have estimated that the added tax will encourage more than 36,000 Minnesotans to quit smoking, saving the state $1.65 billion in future health costs.

A proposal to increase in the state’s alcohol tax was defeated, however. There have been no serious attempts to tax sugary or fatty foods in Minnesota.

You can read the commentary in full online at the Mayo Clinic Proceedings website. That site also contains a video of Dr. Joyner discussing the commentary:

Comments (7)

  1. Submitted by Mike Worcester on 06/05/2013 - 10:37 am.

    Is It Really A Sin?

    Am I the only person who is bothered by the continued use of the word “sin” to describe behaviors such as consumption of alcohol, smoking, drinking pop, or eating Ho Hos?

    Since when did engaging in perfectly legal behaviors become a “sin”? Using that term proposes that those of us who do such actions have some sort of moral failing; that we are not pure members of society. It is a conceited and arrogant mindset that helps explain why this left-leaner despises each and every attempt to raise such taxes in the name of “sin”.

    How does this sound instead – end the ridiculous subsidies for tobacco growing, for sugar growing, etc. (Why should a gallon of milk cost more than three 2-litres of RC Cola at my local grocery store?) Use that funding instead to educate folks on the side effects of the use and abuse of products like these.

    Browbeating us with arguments based on some sort of moral failing premise is insulting and only serves to exacerbate a cultural divide.

    • Submitted by Ginny Martin on 06/05/2013 - 05:29 pm.

      Ginny

      I think it’s time the media, including MINNPOST, quits using terms like sin taxes. These things are not sins–not for almost all of us. And if some people think smoking is a sin, so what? That is not the issue here. It is the consequences of smoking, for example, not just for the individual but for society in terms of early death (I know about this; my father and several other members of my family died far too young because of smoking), obesity, diabetes, and other ills.
      Negative consequences doesn’t fit well into a headline and doesn’t attract a lot of attention–but come on, media, you are imaginative and inventive. Find accurate and fitting words.

  2. Submitted by Adam Miller on 06/05/2013 - 12:45 pm.

    It’s poor name

    And confuses the point of taxes of this type. A more accurate, but not particularly informative, way to describe them is Pigovian taxation, after the economist Arthur Pigou, who advocated for taxes of this type to internalize externalities.

    The point isn’t to punish or single out these behaviors. It’s to price them at a level that better reflects their cost to society. Because smoking or drinking to excess or consuming too many low-quality calories is associated with higher health care costs, and because those costs are born by someone other than the consumer (via health insurance and government-provided health care), adding a Pigovian tax makes the product price closer to it’s overall costs. You’re free continue these behaviors, but it’s going to cost you more, which hopefully will also create incentives for you to cut back or quit.

    But you’re right about subsidies.

  3. Submitted by Ginny Martin on 06/05/2013 - 03:21 pm.

    Sin tax

    That is the media’s name for these taxes, not the government’s or anyone else’s. It only muddles the issue as do too many of the media’s catchy names for things. I don’t know that Pigovian tax will ever catch on. How about “harmful effects” tax. Not a sin, just stupid.

    • Submitted by Ray Lewis on 06/06/2013 - 06:45 am.

      Names for prepaid costs

      Governor Pawlenty did sign a “health impact fee” on cigarettes, to avoid saying the word tax.

      The “user fee” concept is based on the idea that funds are collected in advance and paid out later to cover costs and prevent future problems. It is similar to the gas tax that is dedicated to construction and maintenance of roads, bridges and tunnels. Another example is isurance premiums that should cover costs for care, processing claims and profits.

      Rather than shifting the costs to others to pay in the future, consumers would help pay for the infrastructure of systems needed to address “harmful effects” up front when they choose to use.

  4. Submitted by Gail O'Hare on 06/05/2013 - 07:08 pm.

    “Sin Tax” is the doctors’ term…

    if you watch the video, you’ll hear the speaker use it over and over.

    I thought when we pioneered the disease model of alcohol addiction treatment, we learned to stop branding people as sinners. It’s hard, I know. I’ve smoked for 50 years and am terrified of trying once again to quit. But I don’t eat animals, my BMI, cholesterol and glucose levels are excellent, so I can feel superior to all the overweight people I see around me. Except that I dearly love some of those people. I don’t consider them sinners. We cannot see each other’s losses and stresses, and we can’t glibly condemn others for “bad behavior” or “stupidity” as the complacent reader said above.

    So many variables contribute to our addictions. When smoking began to decrease, obesity began to rise. I don’t say there’s a direct inverse correlation, but the phenomenon is hard to deny. Smoking is clearly bad for you, but how many of the people in the reduced ER-visit study cited by the Mayo doctors were obese or had grown up in homes full of radon and asbestos? How much are volatile organic chemicals (VOCs) contributing to the mix? I may smoke but I would never sleep on a foam mattress, and I can’t stay in a Lowe’s or Menard’s for more than a few minutes without getting dizzy and nauseated. And isn’t it interesting that they’ve finally admitted what we knew despite denials – that diesel exhaust is toxic? Perhaps the oil industry has a vested interest in keeping the focus on smoking.

    These Mayo doctors strike me as surprisingly simplistic. They even argue that sin taxes are the American way. We used to put people in debtors’ prison if they were poor; is that the American Way? We’ve done all kinds of things that are not right, so how is this a valid argument? Instead of nosing into tax policy, why doesn’t Mayo offer affordable residential treatment for cigarette addiction? If they’re interested in reducing the cost of medical care, why did they come to the government to help fund their enormously costly expansion? (And why did these doctors wait to come out with this dramatic and accusatory proposal until after they’d squeezed a sizable chunk of money out of the legislature?)

    Perhaps we could all pay reasonable taxes without attempting to blame each other for the costs of government. When all the sin taxes still haven’t made us immortal, will we start taxing people for every year they live beyond 70?

  5. Submitted by Maureen Beach on 06/06/2013 - 09:57 am.

    There is no evidence to support the claims that imposing taxes on soft drinks will lower obesity rates. In fact, a study conducted by the Yale School of Public Health proved the opposite to be true (http://bit.ly/14SIEKG). If we really want to get serious about reducing and preventing obesity, we need to focus on education, not regulation. Taxes do nothing to teach people about healthy lifestyle habits like balancing calories and physical activity. All they do is increase the hardship on families and establish a precedent that invites the government to tax more common, everyday items.

    -Maureen Beach, American Beverage Association

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