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The Failure Of The Candy Tax

Filed by KOSU News in Business.
July 11, 2012

Last week, we re-aired an episode recorded in 2010 with economist Joshua Gans, author of the book Parentonomics. In the episode, Gans’ 11-year old daughter, B., told us about his technique for keeping her from spending too much allowance money on candy:

“If you want to buy candy with your allowance, you have to pay to your parents a 100 percent health tax, ” said B.

At that time, Gans said the tax was working. B. had never paid it.

“….I have earned no revenue from health tax, which is a shame. It might have been a way to claw back enormous allowance, ” he told us.

After the episode re-aired last week, Gans reflected on effectiveness of the tax, two years later. This is from a post he wrote for Forbes:

“Of course, we are now two years down the track with a more independent child. The issue with independence is that allows for another thing that often accompanies attempts to collect a tax: under-reporting. It did not take us too long to discover that the allowance was being used to purchase candy and my daughter owed a ton of back taxes.”

As for Gans’s other children, the tax hasn’t been a total failure. He writes that they don’t have the same preference for candy as B. so he and his wife have gotten “some good behaviour for free.”

Outside of his home, Gans thinks his tax may hold a lesson for Mayor Bloomberg’s attempt to eliminate extra large sugary drinks:

“The best one can say for things like a health tax is that they put an issue on the table. They might be able to nudge behavior in a good direction but they cannot be expected to make great leaps and bounds. This is the same tension that Bloomberg will face with the ‘Big Gulp’ regulation in New York. It will be good for nudges but those who want lots of soda will get lots of soda.”

[Copyright 2012 National Public Radio]

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