You are a policy person working in the budget office within your state government and you have to make a presentation to your Governor next week. As you know, the overall economy at both the national and state level is improving but the stimulus money from the federal government for Medicaid has ended. Your state is looking for new sources of revenues and/or budget savings as it faces expected increases in Medicaid enrollment under the ACA [if your state is not expanding, there will still be increased enrollment due to the ‘woodwork’ effect].
You also know that personnel from the Public Health Department are concerned with obesity and infant mortality and want to work with the Governor on improving the health of the state’s residents.
Write a two-page policy brief (1.5 line spacing) advising your Governor whether to increase, maintain, or decrease tobacco, beer, and/or soda taxes in your state. Use information from your assigned readings on these ‘sin’ taxes and data from your Excel spreadsheet to support your arguments. Address the following questions in your brief to the Governor in support of your recommendation.
1. Describe how ‘sin’ taxes have changed in your state over time. How does this compare to other states in your region and how does the level of the ‘sin’ taxes in your state compare to the national average?
2. Describe the relationship between sales tax, food tax, and soda tax in your state. Does your state exempt food from sales taxes? Is soda treated as ‘food’ in terms of taxation?
3. Your readings describe the association of these ‘sins’ with adverse outcomes such as obesity, higher health care costs and in the case of drinking, alcohol related fatalities. Describe the pattern of adverse health outcomes and costs related to these ‘sins’ among the residents in your state. How does your state compare to other states in your region and to the other states in the nation on these outcomes?
4. Describe the correlation between overall tax index levels and overall outcome index levels at the state level, within each region, and at the regional level. You can use the literature to provide a potential explanation for these relationships.
5. Research indicates the demand for all three of these goods is inelastic [tobacco = -.40; soda = -.80; beer = -.30] but elastic for hard liquor/spirits [-1.5]. How does this affect your policy recommendation? Is your recommendation based on budgetary impact, public health impact, or both? Are there other policies that you might recommend your state undertake?
Your assigned articles should be used in writing your POLICY BRIEF. The Warner et al article (R) will remind you of the theoretical framework you have learned in your classes and includes a discussion of both efficiency and equity concerns. The other articles (Chloupka, Chaloupka, and Fletcher) provide results of earlier studies on ‘sin’ taxes and consumer behavior.
Regardless of your policy recommendation, be sure you make your arguments logically consistent, clearly written and supported by the inclusion of data from your spreadsheet. A key suggestion is to use section headings as you write to enable the reader to see the key points you are making.
brief must be properly cited, using the style of your choice (APA, Chicago, MLA, AMA).