With obesity levels in the United States steadily rising and with the national desire for a healthcare plan that will reform healthcare and cut costs while expanding benefits and insurance to more of the population, President Obama and leaders in the Senate are considering a new tax on sugary soft drinks. The potential goals for such an excise tax would be to discourage the consumption of sugary drinks, make the population healthier by fighting obesity, and to help pay for a potential healthcare plan that could possibly cost between $750 billion and 1$ trillion. The logic works like this: taxing a certain good raises its price, and taxing a certain good relative to other goods will, all other things equal, lower the quantity demanded of that certain good. And so if the government were to place an excise tax on soda, the amount of soda Americans consume would most likely decrease, which could result in health benefits, assuming that the decrease in consumption in soda is not offset by some increase in a different unhealthy eating habit. Then, if the tax were enacted, it would raise revenue for the government, which could be put towards paying for increases in government healthcare. It is certainly a simple enough plan.
However, there is one serious problem with this proposal, and that is that there is no justification for forcibly punishing people’s decisions about themselves and what they decide to eat or drink. This excise tax would be economically destructive because any thing that changes people’s decisions from what they would do in the absence of coercion makes them worse off, assuming that the activity being decided on doesn’t adversely affect third parties. What people decide to eat or drink doesn’t place any costs on other people in a free market. People are free both to decide what they consume and other people are free from possible negative affects of those people’s decisions.
But this brings us to another problem: healthcare. When the government “provides” healthcare by taxing the people and then paying benefits to other people, the condition on which freedom works in this regard is suddenly destroyed, because someone’s decisions about the foods and drinks they consume can suddenly cost everyone in society because they will end up paying for the increased healthcare costs someone with unhealthy habits through their taxes. Suddenly, there is a reason for everyone to have an interest in controlling what everyone else does. No longer will freedom of choice be beneficial to those who live healthy lifestyles because they will pay for the poor choices of others. And so the freedom of people to decide what they want to consume based on the costs to their health their decisions can cause will be restricted. This is just one of the many costs of government-provided healthcare.
In a free market, the costs of unhealthy decisions are born by the individuals who make the decisions, and thus they have the freedom of making the decision themselves by weighing the costs and benefits of each possible decision being considered, and then choosing the best course of action. If an individual wants to consume large amounts of soda and sugary drinks and to bear the costs of poor health from high caloric consumption among others, then they are better off if their decision is not affected and they are allowed to consume large amounts of soda and sugary drinks, because they have determined that the most beneficial course of action and anything that changes their decision forcibly such as discouraging that through an excise tax on soda is putting them into a situation in which all of their potential decisions are worse off than the decision they could have made in the absence of that tax.
There is also the issue of insurance. One might think that through insurance, the costs of someone’s decisions that pertain to their health could be placed on others through the way that everyone pays into insurance and then the costs are born by the insurance company as a whole, paid for by the premiums of everyone who wants coverage. However, this is not so, because those who place higher costs than others on the insurance company are made to pay for their decisions through higher premiums. The purpose of insurance provision is to provide security from risk, not to socialize someone’s personal costs, and that’s how it works in a free market, through if the government gets its way by making it illegal for insurance companies to discriminate on the basis of pre-existing conditions, insurance could be turned into a method of partial socialization. Discrimination is not a bad thing when it applies to pricing for insurance, because it’s discriminatory pricing that protects our individual freedom when it comes to health decisions.
So it should be clear to just about anyone that the soda tax is not a straightforward way to fix the healthcare problem, but a problem in itself as a threat to economic welfare and freedom in general. Healthcare has its problems, and these problems have their solutions, put this particular proposal is not one of those solutions, simply another problem.
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