Tuesday, July 21, 2009

Politically unpopular taxes -- smacking the wrong dog's nose

Today's Wall Street Journal has a piece entitled "Ten Questions on the Health-Care Overhaul" by Janet Adamy. A number of statements are worth contemplating. For example, Ms. Adamy asserts that "no industry stands to gain more from the changes than health insurers". Certainly, getting their hands on the pristine pool of low-risk young healthy customers will be a boon to their bottom lines. Another is about how a government-run plan might run the poor beleaguered insurers out of business by undercutting them. Well, duh! Is that not how the market is supposed to work -- out with the inefficient and in with the lean?

But what struck me most was the assertion that the Congress would prefer to generate revenue to pay for reform by taxing the rich (incomes over $250,000) than by levying a tax on soda and other sugary drinks, as the latter is thought to be "politically unpopular". Nothing about this discussion strikes me as being more absurd than this logic. Slapping a tax on the rich is like smacking the wrong puppy on the nose for making a puddle in the house -- the action and reaction are completely divorced from each other and therefore no behavior change can be expected.

Here are some facts. Between the 1960s and the millennium, the caloric consumption from sweetened beverages has doubled, adding over 200 empty calories to our daily diet. Since the intake of extra 50 calories/day results in a 1 kg/year weight gain, it does not take a Nobel laureate to connect the dots between sweet drinks and our much lamented obesity problem. And if you believe that obesity is the public health scourge that it is purported to be, as our legislators seem to, is it not then illogical to take off the table a measure that will result in not only restricted exposure to the problem, but also in improved access to the solution?

Perhaps the Congress is thinking that taxing the richest 1% of the American people will reduce their consumption of sweetened drinks enough to mitigate the overall societal obesity epidemic and reduce healthcare costs. If so, they need finance experts even more urgently than the FDA!


  1. Excellent post. I'll be RT'ing it more than once today.

  2. I remember you telling me about extra calorie consumption and weight gain when we met at Woodstar. Great bedtime reading :)

  3. When I first read about this taxing the rich, I was surprised because I expected (naively, I guess) that taxes would be added-to/raised-on items that have been shown to be specifically harmful – cigarettes, alcohol, perhaps even refined sugars. As a Canadian, I was born under ‘socialized’ healthcare and a significant contributor to its ongoing funding is the category of so-called ‘sin taxes’. A pak of cigarettes is over $10 at the local convenience store and a drinkable bottle of wine is between $10 and $15 unless you hit a sale. The lion’s share of these prices are taxes. You are absolutely right - why not then tax one significant cause of the current obesity epidemic – added refined sugars (taxed by the calorie?). It obviously makes sense to discourage behaviors that result in ill health and increased costs especially for those behaviors that are particularly common. In targeted taxation you have a potent weapon against the ever-rising costs of healthcare.

    To many Americans, however, this represents social engineering and infringes individual rights and they resent it. As a result, taxing to manipulate choices would not be personally acceptable. For this reason alone such taxation would be seen by the Democratic administration as likely to open a debate that would be distracting or too rich in material for the GOP critique. So “tax the rich” becomes the default (and tired and familiar) position, especially now that the Republicans are weak and the ‘rich’ have pulled in their heads for a while – easy targets.

    Clearly America is in for social changes of tectonic proportions over the next decades driven by financial necessity. While rational administration of healthcare demands a single-payer system, it equally demands a carrot-and-stick approach to discourage those patterns of consumption that lead to preventable and expensive morbidity among millions of people. It’s unfortunate that such a positive start to healthcare reform cannot also take advantage of the opportunity presented by the need for funding to limit the ‘demand’ side of the equation by taxing to discourage, or at least pay for, the pathology. But maybe ‘one thing at a time’.

    One irony that strikes me is that many primary care physicians and specialists will be numbered in that greater-than-$250,000 group. Single-payer (gov’t) healthcare in Canada began locally, not for the altruistic reason that some people could not afford proper care, but because the physicians, post 30’s depression and WWII, were sick and tired of being paid in chickens and bushels of apples if they got paid at all. Single-payer healthcare served to implement a reliable fee-for-service model that they could live on and, as a result, the delivery of healthcare improved in quality and coverage for a larger and larger fraction of the public until legislation made it universal. Universal healthcare was physician-driven in the beginning!! It appears that many will sacrifice $$ in supporting the current proposal. Surprisingly, the AMA appears to have come out in favor of the enabling legislation if not the means to pay for it.

    Yes you can!!

  4. Thank you, ian, for your comment! I agree that we are not ready for social change. For some reason we are naïve enough to think that there is no price for our freedom, and that personal responsibility has no role in our well-being. We have a lot to learn from our friend up North!

    BTW, I think that the AMA is supporting this for 2 reasons: 1). It would appear wildly self-serving not to (they may have learned from their previous experiences of the 1950s and the 1990s), and 2). They are afraid that something even worse -- think single-party payer (gasp!) -- is on the horizon. They are in effect cutting their losses. It did not hurt that there has been some bending on Medicare reimbursements.