Posted by
OB Busch on Thursday, September 24, 2009 4:32:21 PM
A group of do-gooders, propelled by a report in the New England Journal of Medicine,
have proposed a 1 penny an ounce tax on products containing sugar (or corn syrup),
particularly Soda Pop. That would increase the price of a 2 Liter soda by 67 cents.
2 Liter bottles of name brand sodas are frequently on sale for 99 cents.
Your 99 cent sale suddenly becomes $1.66.
Muhtar Kent, the chief executive of Coca-Cola, called the idea “outrageous.”
“I have never seen it work where a government tells people what to eat and what
to drink,” Mr. Kent said, according to a report by Bloomberg News. “It if worked,
the Soviet Union would still be around.”
But hold on. Let’s look at the template. Suppose that in 1965 someone proposed a 20 cent tax on cigarettes,
($1.35 in today’s dollars). The opposition would have been the same as this 1 cent
an ounce tax on sugar is getting today. In 1965 smoking was an acceptable activity.
There was no guilt associated with smoking. Non-Smokers rarely confronted
smokers about their habit. By the early eighties smoking in the workplace (except in designated areas) was gone.
There was guilt associated with smoking and non-smokers felt free to confront
smokers about their habit. Taxation and lawsuits coupled with increasing restrictions
on where one could smoke made smoking a ‘guilty pleasure’. The progress of this
guilt was measured in 1988 in California. At the time about a third of Californians
smoked cigarettes. A referendum was on the ballot in November 1988 to increase
the tax on cigarettes by 25 cents a pack. It passed with 90% of the vote. This
‘sugar tax’ will take the same route. Not that long ago a person drinking a soda
was hardly noticed. Today there are only a few reading this that hasn’t had
someone, a co worker, relative, or friend, question them on their consumption of soda.
The first taxes will be small, perhaps a penny per 12 or 16 ounces.
We will comply because the guilt trippers will have made us feel bad about our soda habit.
Back to the template.
Cigarettes are taxed at between $2.50 and $3.50 a pack in many states.
The original taxes were small and hardly noticed. The recent taxes have come
in big chunks, such as the 75 cent per pack tax recently enacted in Wisconsin.
Enjoy your Soda!
Clunkers
Back in the 80’s when the car companies first offered factory rebates dealerships
and their financing companies allowed the rebate to act as a down payment.
It didn’t take long before this practice was stopped due to higher than normal
defaults (repossessions).
Many of the old cars that qualified under the recent Cash for Clunkers program
belonged to people that have not had a monthly car payment for many years and
have failed to plan for one. Since their clunker was ‘worth $4500’ in trade in value,
it automatically qualifies as a down payment. A larger percent than normal will
default when faced with the reality of a monthly payment.