Cities Consider 'Pigovian Taxes' As Means Of Raising Money For Schools

Jul 11, 2016

Pigovian taxes, such as Philadelphia's new soda tax, create very mixed reactions among consumers. University of Pittsburgh Katz Business School professor Cait Lamberton explained an individual's’ view of the issue depends on their perception of how certain personal behaviors impact the whole community.

“The people who support them most voraciously are the, ‘No man is an island people,’” said Lamberton. “The people who reject them the most are the, ‘No, I’m an island. My behavior affects only me.’”

This split doesn’t always occur along party lines.

“Support is not determined by conservative or liberal,” said Lamberton.

Proponents of Pigovian taxes say those who engage in certain behaviors should be held accountable for the larger problems created. For example, soda is linked to obesity, which is linked to a rise in health care costs. For those who support levying Pigovian taxes, that rise in cost is incurred by one, but shared by many. Thus, the soda consumption has cost a community, rather than the person drinking the soda.

Those opposed to the tax believe they are not only a state overreach on individual behavior, but that they target lower income families with fewer accessible food choices.

Advocates are fighting the notion that taxes like these are regressive by offering a solution; stores that offer healthier options would be given tax subsidies.

“It would reduce the aggressiveness of the soda tax and also improve their nutritional options,” said Lamberton.

Lamberton also said that these taxes would create long-lasting benefits to the same communities who may initially suffer.

“It’s a short term hit on a couple cents on something that is optional, but in the long term we can have a better path to empowering these communities and helping children.” said Lamberton.

Once categorized as a “sin tax,” Lamberton explained the change came as a result of consumer feelings.

"The term has been dropped out of popularity (because) no one likes to be scolded."

Lamberton added that the tax was viewed more positively when it was framed as a reward rather than a punishment.

“It could still be that a sugary drink is 50 cents more, but look what you actually get is a price discount on a healthy drink, then people felt like it was okay,” said Lamberton.

Philadelphia's soda tax will go into effect at the start of 2017.  There’s no word from Pittsburgh city officials on whether this could be enacted in the Steel City.

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