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Mayor Nutter: Tax Crack! March 6, 2010

Posted by Amir Roth in business, politics.
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You can’t go online these days without seeing the words budget deficit, followed either by: i) an explanation (usually partisan) of how large deficits suppress future prosperity, ii) reading about Greece’s austerity plan, or iii) seeing a picture of holier-than-thou Jim Bunning (R-Ken). Actually, rumor has that “perfect game” Jim held up the $15 billion (one dollar a week for every American) jobless benefits bill not because he objected to adding to the deficit which would suppress the future prosperity of and increase the tax burden on his nine children (is that a congressional record?), but because the scheduling of the initial vote caused him to miss the Kentucky-South Carolina game. At least Jim is not seeking re-election which should help balance out the frightening number of Democrats who are stepping aside at the end of their current terms if not immediately. But I digress.

Well, here is some quasi-positive deficit related news: Philadelphia’s new deficit reduction plan. I don’t think this is official yet, but evidently Philly mayor Michael Nutter (a pretty cool guy who I met at Penn commencement last year) plans to close the city’s $150 million budget deficit by setting: i) a $300 trash collection fee ($200 for qualifying low income families), and … ii) a 2 cent per ounce tax on sugary drinks! The trash collection fee is a little bit obnoxious-it should be set up as a tax per pound or per standard size can or something like that rather than a flat fee-but it’s on the right track in theory. And the soda tax is absolutely brilliant. I am a firm believer that government should pay for services by taxing vices that decrease public welfare, either directly or indirectly by increasing its financial burden. People are up at arms about the soda tax, but at base it’s no different than the cigarette tax, in fact they even come to about the same per pack.  The soda tax comes to $2.88 per 12-pack and the ciggy tax comes to $2.60. And no one says a peep about the cigarette tax. And its not because of the direct effect on public welfare via second hand smoke. Smoking bans effectively take care of that. It’s because everyone understands that people who smoke will consume more health-care in the future. The tax is just a way of getting them to pay into that system now. Well, soda is the same way. If you drink enough soda to actually be impacted by the soda tax, chances are you too will consume more health-care in the future. Why should you not pay into that system now? You should! Like the cigarette tax, the soda tax will have one of two beneficial outcomes: a healthier population that consumes less health care or more money for the city to pay for this health care.

And why stop at cigarettes and soda? You want to really put economic incentives to use? Make crack/crystal-meth/marijuana/mouthwash/whatever legal and tax it. Tax the hell out of it. The real tragedy of the war on illegal drugs is not that it’s hopeless, is that by making drugs illegal, the government forfeits both a lucrative revenue stream and the ability to influence production and consumption by tax policy. Same for porn. Gambling. Dogfighting. Okay, maybe not dogfighting. Mayor Nutter, are you reading this? You need to put Philly Bluejay on your blogroll!

P.S. As for the trash collection fee? By being set up as a flat fee, it is essentially just a revenue generating device that isn’t going to influence behavior. It would be better if the fee could be set up as a per-use tax that would actually encourage people to produce less trash, i.e., to recycle and compost more and to buy fewer items with excessive packaging. I understand that the logistics here are more difficult (what’s to stop people from putting their trash into their neighbor’s cans?) but maybe someone who reads this blog will have an idea. Who am I kidding? Only my wife reads this blog. Anyways, if you read this blog, this is your homework. Come up with a trash collection scheme that will either make it difficult for people to behave dishonestly or disincentivize them from doing so.

P.P.S. I subscribe to urban dictionary “word of the day”. I’m not sure why. The words are rarely funny and often offensive. OK, now I remember why I subscribe to it. Today’s UD WOTD is “self-defecating”. Self-deprecating is intentionally downplaying a strength. Self-defecating is unintentionally playing up a weakness. Pass it on.

P.P.P.S. I took up swimming a few months ago and today for the first time, I swam a mile. Actually, a little bit more than a mile. 1,800 meters. Took me 47 minutes. Mike Phelps I will see you in 2012. On television.

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