On the soda tax, Clinton and Sanders contradict themselves

Hillary Clinton won the Pennsylvania primary last night, but the fight there revealed a fundamental question that will continue to vex Democratic candidates in the months and years to come: when is it acceptable to pay for progressive policies with regressive taxes?

In Philadelphia, Hillary Clinton and Bernie Sanders wrangled over a previously obscure proposal by Mayor Kenney to raise $400 million for universal pre-kindergarten with a 3-cents-per-ounce tax on sugary drinks. Clinton supported the proposal, arguing the need for universal pre-school justifies the additional tax obligation. Sanders opposed the measure, claiming it is unfair to fund public policy with a tax that falls heavily on the poor. Both candidates are raising important considerations. But, oddly enough, both Clinton and Sanders are also contradicting the principles that define their national tax proposals.

First, here’s how Clinton got it right. A tax on soda is often described as a “sin tax”—a policy that is intended to raise a product’s price and thereby discourage its consumption. Sin taxes have been shown to work—for instance, heavy taxes have reduced smoking rates. Sin taxes also raise a lot of money.

But Sanders is right too. Though soda sellers sometimes bear part of the cost, taxes on soda are in general regressive—that is, their immediate costs fall more heavily on lower income people than higher income people. That’s because poorer people spend a higher percentage of their income on food and drinks than wealthy people.

The argument can be made, however, that the immediate cost of a tax is not what matters; what really counts is the overall impact of a policy. In the case of a soda tax, that means you should take into account the health benefits for people who drink less soda and the societal benefits of universal pre-K. Both of these benefits would likely accrue especially to lower income people. So maybe those upfront regressive costs are outweighed by the policies’ overall progressive benefits.

This is a fundamental debate about what makes good tax policy: Do we consider policies based on who pays at the beginning, or who benefits overall? Ironically, the candidates’ stances on the soda tax are at odds with their own national proposals. Throughout the campaign, it is Sanders who has defended broad-based taxation for a stronger social safety net, while Clinton has held the line on tax increases except for the very wealthy.

Sanders’s plans are basically a major expansion of classic, New Deal-style social programs. He pays for immense investments, like Medicare for All and paid family leave, with taxes on the rich, but also with payroll taxes that fall heavily on working class people. His rationale is that people with lower incomes would benefit hugely from these programs, so their initial costs are worthwhile. But he did not apply this same logic to the soda tax.

Clinton, by contrast, has stuck with the New Democrat position that tax increases must only fall on the very wealthy. In the January 17th South Carolina debate, Clinton attacked Sanders for precisely the kind of tax policy she is promoting in Philadelphia. “I’m the only candidate standing here tonight who has said I will not raise taxes on the middle class,” she stated. On the soda tax, however, Clinton has suddenly expressed support for a tax that will fall not only on the middle class, but on the poor.

Sanders’s and Clinton’s inconsistency are part of a larger problem for Democrats when it comes to what kinds of tax policy to support. On the one hand, regressive tax policies are a disaster for the poor if they are not accompanied by progressive spending. This is particularly true when those taxes fall on necessities, like groceries. On the other hand, strong social safety nets are built when everybody chips in; regressive taxes are how European welfare states pay for progressive social policy. If Democrats want to achieve big social reform, they are going to have to learn to talk about when tax increases on working people are worth the cost.