New York Soda Tax

This from the Financial Times:

“New York state could impose an “obesity tax” on high-calorie soft drinks such as non-diet versions of Coke and Pepsi as public concerns over obesity turn potentially fattening foods into a politically acceptable target for taxation.

A number of US states have sales taxes on soft drinks, sweets and snacks, while most other foods are tax-exempt. But New York’s proposals would be the first to distinguish between “diet” and “non-diet” products. It would also double the existing 7.5 per cent sales tax, already one of the highest in the US, potentially raising over $400m.”

This is the classic exam of bureaucrats and politicians using Science to propose legislation. I am sure that Coke or Pepsi makes people fatter than Diet versions. This would only make sense because there are zero calories in Diet and greater than zero for regular versions.

First, will it work? I would imagine that it would work and that many people would shift their consumption. This makes sense because anytime you raise taxes on something, people will economize. Now the Governor cites this tax to try and raise revenue. If your purpose is to shift consumption then that will mean the tax will not bring in more revenue. People will avoid creating revenue by shifting. This is somewhat of the Laffer curve effect.

A major problem with this is that it puts a burden on the business owner. They would have to keep a record of how many regular sodas are sold so that the avoidance of the tax isn’t done by the business owner. Another problem is that some businesses like McDonalds would either have to eliminate serve your own drink fountains or charge everyone for the tax. All of these put an extra cost on the business owner thus raising the cost of all the drinks and food.

So prices will go up for all regardless. How about if you want to lower the deficit, lower the spending?

The rest is here.

~PCCapitalist

Marxist of the Week: Rep. Charlie Rangel (D-NY)

This from the Wall Street Journal:

“This week Charlie Rangel — the New York Democrat and powerful chairman of the House Ways and Means Committee — gave a news conference in Washington where he admitted failing to report on his taxes $75,000 in rental income from a villa he owns in the Dominican Republic.

Just a few months ago Mr. Rangel admitted that he occupies four rent-stabilized apartments in a posh New York City building. It turns out that in a city with a very tight housing market, Mr. Rangel has wrangled himself a pretty good deal, thanks to rent-control laws that are ostensibly aimed at helping the poor and middle class.”

So, economically rent controls are one of the worst policies that anyone could create. They are politically popular because the idea is that you are keeping rent low for people who can afford it. The problem is that there is no incentive for the apartment owner to keep it up. There are also no incentives for new investors to build new apartments. This in fact, would actually lower the the price of the apartments in the market. Rent controls screw up the competitive market and can completely kill a housing market. Here is more from this story:

“His defense, that “They didn’t give me anything. I’m paying the highest legal rent I can,” is actually true. And that’s precisely the problem. Rent control and rent stabilization have increasingly become a tool of the well-heeled and the well-connected. New York Gov. David Paterson, for example, also keeps a rent-stabilized apartment in the Lenox.”

This is obvious because laws keep the owners from charging more than the rent controls. Of course, people can do things like charge more for a key to be made, or make large non-refundable deposits. This almost acts as a bribe and in some cases, there are just straight up bribes. There is always going to be a black market if the demand is high and the supply is low.

Not to mention the reason, why all of this came up. This is because he evaded taxes. A Democrat evading taxes is like a Nazi hating killing.

There is obviously a corruption problem on top of all of this. The rest is here.

~PCCapitalist