Comments sections are hardly the place to go for well-considered musings on topical issues. They are, however, a repository for the layman’s understanding of complex issues.
 
Consider Eric Crampton’s opinion piece on hypothecated sugar taxes. To liven up a dry topic, Eric uses the example of taxing hipster beard oil to fund Tieke (native bird) recovery. The point is that ring-fencing revenue, even if it is to fund virtuous projects, will break our tax system.
 
Commenters complained that the example was ridiculous because it bundled two unrelated activities. No government would push such frivolity in the real world.
 
Except Philadelphia just has.
 
Philadelphia’s new soda tax doesn’t save the Tieke, but it does offer universal pre-kindergarten, which may be just as popular with voters.
 
After failing to persuade voters on public health grounds, Philadelphia switched up the soda tax rhetoric from a health initiative to a lucrative source of government revenue. The soda tax includes both sugary drinks and diet drinks, and was presented as “a big untapped source of revenue that could be used to pay for popular initiatives...”
 
The soda tax now has a much loftier goal: alleviating poverty. Voters were told that the money would be invested in universal pre-kindergarten. Details are emerging that other projects will also be funded that were not mentioned in the original proposal.
 
The most obvious trouble is that the revenue will be unpredictable. In fact, if soda taxes work the way public health experts anticipate, then revenue for these projects would decrease over time.
 
Besides, there are endless bundles of things that could be taxed and endless programmes that could be funded. The trick is to pick a programme that no one but a cold-hearted economist could object to.
 
Out of all the products that could be taxed, choosing soda also is rather short-sighted. If the aim is to raise revenue to address poverty, taxing soda is not exactly the nectar of the rich. The amount of middle class churn this redistribution generates surely does not justify making the poor poorer.
 
Meanwhile, those who dare speak out against the tax must now deal with the accusation that they hate children, or do not care about poverty.
 
A hypothecated soda tax may not ease obesity or poverty, but it is a great way of distracting voters from the fact their government cannot deal with a limited budget or manage trade-offs.