Monday, January 4, 2010
Tax Your Thirst
States will enact some sort of so called fat-tax before partying like it is 2019. In 2009 the fat-tax was kind of a non-story, except that Food Industry trade groups spent an estimated 8 million US dollars lobbying against proposed taxes – Despite the fact no state or federal laws were being drafted to tax snack foods.
And because sometimes throwing money at a problem isn’t enough to fully combat it, the CEO of Coca-Cola Muhtar Kent, decided to engage in a little his-teria: Commenting on the proposed fat tax to the Atlanta Rotary Club, Kent was quoted saying, “I’ve never seen it work where a government tells people what to eat and what to drink…If it worked, the Soviet Union would still be around.” Which is odd considering Coke sold its products in the Soviet Union beginning in the Reagan Era through the demise of the evil empire, currently sells its products in communist China and the familiar red can be found in the free and open societies of Saudi Arabia, Iran and Cambodia. Considering their record with dealing with repressive regimes, I think Coke’s only true objection to government dictated soda pop consumption would be if Pepsi got that contract.
Big Snack is likely correct to believe that their products will be singled out for a value-added tax in the near future. Proponents of the sin taxes like to point out what cigarette taxes did to reduce smoking. While the public was willing to accept that nicotine, an addictive drug, as a category worthy of government purview, transferring that regulatory spirit to household items like sugar and salt might not as easy a making a Vulcan-like rational argument.
For all the hurdles in constructing a value-added fat-tax, there are the dollars at the end of the finish line, an estimated trillion of them. Along with the increased revenue for a deficit saddled nation - enticing people to lose weight, there is an anticipated trillion dollars in healthcare savings – enough to motivate insurance providers to endorse a fat tax.
You don’t have to be Ayn Rand to be wary of big governments involvement. Federal crop subsidies for corn help make high fructose corn syrup cheaper than fresh produce. Fairness questions abound - What will Big Brother choose to tax - calories or products? Will it be the 1600-calorie fatachino or just the 300-calorie soda? Likewise, donuts and Fritos get slapped with the fat-tax but not fair trade chocolate and organic almonds, right?
4/5 of states already posses the ability to collect a fat tax through sales tax mechanisms, I would look for state governments to levy a tax on soda and chips before the Federales get involved. California will lead the way: Being desperately broke, body-image conscious and having a tax code that is impossible to reform will spur the Golden state into action. The size and power of California’s consumer economy is too big for snack food manufacturers to boycott the market over a tax. Once Callie goes, other states will follow suit. Like the Carolinas protecting smoking, Coke’s home state of Georgia might not enact a fat tax until the ought 20s roll around.