I agree with Mike

I woke up this morning and realized I agree with Nashville Democrat Mike Stewart, who wants to tax soda in exchange for reducing the sales tax on food.

Yes, I agree with a Democrat. Hold on to your hats, kiddos.

According to Humphrey on the Hill, Representative Stewart proposed HB0537, which would lower the sales tax on food from 5.5% to 4.5% and institute a tax on bottled soda at a rate of one-cent per ounce.

I don’t agree with why Stewart wants to do this, but I’ll address this later.

This should be a no-brainer for Republicans in the General Assembly. If the soda tax is revenue-neutral (and this is my caveat – it has to be revenue neutral), then this does two things:

1. It reduces the financial burden on families who buy necessary food items in a tough economy. This is important. It may not change their overall purchasing habits (getting to this), but it is a good faith gesture by the government that people will make the right decisions when shopping for groceries.
2. It’s not a tax increase if it’s revenue neutral. Now, the Americans for Tax Reform crowd will say it’s a tax increase, and taken by itself… it is a tax increase. But offset it by lowering the overall sales tax on food, and the difference is likely negligible.

For those of you who aren’t sure what the conversion rate is from ounces to liters, this will increase the cost of your two-liter by about $.67. There are 33-and-some-odd ounces of soda in the two-liter bottle. And, of course, your 12-, 16-, and 20-ounce bottles would increase by those same rates, respectively. Instead of paying $.99 for that bottle at the convenience store, you’ll pay $1.19 or something.

Regardless, families will end up saving money overall when they buy the food that goes on the table. But back to Humphrey’s piece:

HB 537 offers a simple trade – cut Tennessee’s food tax – one of the highest in the nation – and pay for it with a tax on sugar sweetened beverages, which have been linked by many experts to the epidemic of childhood obesity.

“Families have to buy food, but they can cut back on non-essential items like soda when times get tough,” said the bill’s sponsor, State Representative Mike Stewart.

Even with the proposed tax, soda would remain cheaper than it was in the 1970′s, adjusted for inflation. “With the use of high fructose corn syrup instead of cane sugar, the price of soda has come way down whereas the price of food is going through the roof. This is one way to help a young family buy food without imposing a new tax on businesses that might hurt the economic recovery,” Stewart observed.

Additionally, studies show that much like the increase in the cigarette tax this would likely lower consumption and improve health, an increase in soda taxes also can lower the obesity rate for high risk children.

The fiscal note for the bill shows that the proposed 1% reduction in Tennessee’s food tax, which would reduce Tennessee’s rate to 4.5%, would be entirely paid for by the increased tax on sugar sweetened beverages. Beverages that are not sugar sweetened, such as diet sodas, would be taxed less under the proposed change. “For most families, this will be a well-deserved tax break,” Stewart noted.

The bill is scheduled to be heard in the House Budget Subcommittee on Wednesday, March 30, 2011 at 11:00am.

My understanding of the proposed law is that it is only a tax on bottled soda, so you’re free to enjoy your canned sodas as much as you want (although, amendments to the bill might very well change that outcome) without being taxed under this proposal.

What I don’t agree with is one of Stewart’s arguments behind this: social engineering. If we trade taxes on food for taxes on soda, kids will drink less soda. Mike, that’s just stupid. If this was the ONLY argument for this proposal, I would be opposed to it.

When Tennessee increased the tax on cigarettes, people didn’t stop buying cigarettes. They didn’t stop smoking. Imposing a tax in an effort to change behavior is counterproductive. Think about the logic: I want people to stop doing something, so I am going to tie the state budget to revenue gained from people doing it. Hypothetically, if people stop doing it, then you have to raise taxes elsewhere to cover the losses. If you’re relying on that revenue for – say, government programs to stop that behavior (ahem, Bredesen) – it just doesn’t make sense.

I am not opposed to funding government through taxation. I am opposed to unnecessary programs and government which restricts liberty. At the state level, the most important issues are transportation, education, and public safety. Other “feel good” programs should be cut in order to fund the priorities first.

Before I get off on some tangent, focus. I’m curious to see what the Republican argument against this proposal is. I think this is a responsible way to (1) help families and (2) transfer the fiscal burden from necessary food items to unnecessary items. I don’t realistically think people will buy less soda, but it will at least reduce Tennessee’s role in taxing your dinner.

So, my advice to Republicans is: Feel free to vote for Stewart’s proposal. It helps families and is revenue neutral. It’s really pretty simple.