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.”
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.