is an economics professor at the University of Mississippi
History, as Franklin Delano Roosevelt once remarked, does in fact repeat itself.
Not long after taking office as the nation's first treasury secretary, Alexander Hamilton persuaded Congress to enact a selective tax on whiskey. He believed that the consumption of distilled spirits, "carried on to an extreme, no doubt very much on account of their cheapness," threatened the health, morals, and economy of the new country.
Hamilton's tax nearly ended in bloodshed, averted at the last minute when the Whiskey Rebellion's leaders surrendered to a federal militia led by President George Washington himself.
Americans thought the Revolution had freed them from the duties King George levied on tea, newspapers, soap, salt, and more. But before the Constitution was a decade old, selective consumption taxes had returned in full force. They have been with us ever since.
Secretary Hamilton exploited moral opposition to "demon rum" to help pay off the nation's war debts. Now, more than two centuries later, sin taxes are again in play as Congress looks for ways to finance health-care reform.
Recognizing that further hikes on existing excise taxes for Congress' two old standbys - alcohol and tobacco - will not raise enough, Washington is considering taxing "sugary" soft drinks that supposedly contribute to the modern sin of obesity.
Proving FDR's adage, this would not be the first time federal excise taxes have been levied on soft drinks. One was enacted during World War I; another was in effect briefly at the start of the New Deal. The states also have gotten into the act from time to time.
Suggesting "soda is clearly one of the most harmful products in the food supply," as the head of the Center for Science in the Public Interest did, recasts the proposed tax as nudging consumers toward a healthier lifestyle. According to one estimate, a tax of 1 cent per ounce would raise $17 billion per year and reduce consumption by 13 percent. This appears to allow the government to do well by doing good.
Yet the reality is that soft drink sales have been declining for nine years without a tax. It is a stretch to argue that sodas have contributed significantly to an obesity "epidemic." In fact, obesity rates in the two states that tax soft drinks, Arkansas and West Virginia, are among the highest.
Selective excise taxes violate a widely accepted principle of public finance known as "horizontal equity": that those in similar economic circumstances ought to bear similar tax burdens. One person's tax bill should not be higher simply because of what he chooses to consume.
Excise taxes also are blunt instruments; they punish responsible consumers as well as those who overindulge. Worse, a soft drink tax would be regressive, falling more on the poor than on the wealthy.
Singling out consumers of some products to finance a health-care plan aimed at all Americans is fiscal discrimination at its most brazen. And the further the nation moves toward single-payer insurance, the more pressure there will be to tax any product that anyone, anywhere, can argue is bad for one's health.
Today it may be soft drinks. Tomorrow it may be ethnic food, coffee, bacon and eggs, hot dogs, and red meat.
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