There’s an interesting public policy question in the NY Times this morning. An editorial details a dilemma in Albany, New York State over the application of a ‘soda tax’ – a ‘penny-per-ounce’ tax on sugary drinks. Here are the arguments:
- The tax would give a recession-hit city a new way of raising revenue without recourse to increased direct taxation.
- The tax would fulfil public health goals, discouraging the consumption of sugary drinks. This would have a long-term positive impact on the city’s obesity problem.
- The tax would raise public awareness of the dangers of poor food and drink choices, which would also have a long-term beneficial impact.
- Indirect taxation is regressive. Poorer households will pay a disproportionate cost.
- And why should choices be made on people’s behalf about what is good or bad for them?
- In this particular case, there is a powerful commercial lobbying interest too.
What to do? Our own work with Volterra revealed how difficult more indirect taxation (through user charges or taxes similar to the above on tobacco, alcohol etc) would be to apply progressively in an already quite redistributive system. But on the other hand, how can socially responsible behaviour be encouraged without using these kind of ‘hard’ levers? (less a ‘nudge’, and more like a shove!).
In the end, the issue comes down to choices. No right answer. And this brings us back to the age-old question of political legitimacy. How connected are local decision-makers to the people for whom they are making decisions? To what extent are the perspectives of those consuming fizzy drinks and those legislating on them aligned? Tough decisions are surely more legitimate (and palatable) if they are made close to the people they affect – and in proper consultation with them.
But in order to make this consultation work, people need good information. That is where the power of the commercial lobby can be distortive and malign. And that is what can turn dilemmas of this type into mud fights where self-interest, public good and mandated political authority are hard to disentangle.