Skip to main content

Eat Your Vegetables: City Council Considers A Well-Disguised Sin Tax


The Oklahoma City Council is considering a well-disguised sin tax. They call it a Healthy Neighborhood Zoning Overlay, but the effect is the same. It limits new dollar stores in the specified neighborhood. The ostensible goal is to create a welcoming environment for grocery stores selling fresh meat and produce. But it accomplishes this goal by giving existing dollar stores a monopoly, which will raise prices, and punish residents for shopping at the purveyors of (allegedly nothing but) junk food, instead of subsisting on fresh, organic kale smoothies like good little citizens.

Why would the Council intentionally restrict the supply of stores where many of their residents buy basic household goods and food? Several possibilities present themselves, though none are sound. 

A fundamental misunderstanding of the laws of supply and demand.
Economists call the current state of the neighborhood a contestable market: dollar stores choose low prices because the mere potential of competition keeps them honest. If they charged monopoly prices, a competitor, enticed by the potential for abnormally high profits, would enter the neighborhood, causing both sides to lower prices again. 

The proposed Zoning Overlay, however, would end this deterrent to price-gouging. If new stores are too difficult to open, or prohibited from selecting the best locations, what is to stop the existing stores (all of whom are owned by the same parent company) from raising their prices? In fact, even stores who were vigorously competing would likely raise their prices in unison with each other (effecting monopoly pricing without an illegal conspiracy), once they were protected by this type of Zoning Overlay.

A misunderstanding of basic nutrition.
The dollar stores in question offer at least some frozen or canned vegetables. While many prefer the taste of fresh produce, there is substantial evidence that frozen and canned vegetables are just as healthy as fresh. Is the problem the availability of nutrients? Or is the Council trying to bully residents into eating the “right way?

A desire to elevate a special class of merchants.
This seems like an unintended consequence, not the design of the program. But federal antitrust laws carve out an exception for state and local laws. So if someone wanted to favor a particular kind of store, zoning laws can become a legal way to cheat the system. The state gives new car dealers just this sort of protection, explicitly stating that it does so to protect them from competition, in order to make sure they stay viable. Existing dollar stores may even realize the boon they are about to receive from the city council. 

Using public policy to punish, and thereby reduce, specific, undesirable behavior. 
This happens all the time. We call it a sin tax - think cigarettes, alcohol or gambling. Are we comfortable labeling junk food a “sin”? A traditional sin tax directs the proceeds to the public coffers, for some worthy project to offset the sin. Here, the proceeds of the “tax” will go to the purveyors of the so-called sin. Is that a desirable policy? 

The Council wants to impose its dietary norms on the public. It can’t force people to eat healthy. A direct tax on junk food, much less healthy nonperishables, would be wildly unpopular. So it found a clever workaround to punish residents for patronizing unhealthy dollar stores over virtuous grocers. 

The proposed zoning overlay is a relatively small geographic area. Of course, the initial cause for concern was the difficulty residents without cars have getting groceries. These are the people who will still be stuck paying monopoly prices at dollar stores, while residents with cars go outside the overlay to do their shopping. The Overlay is likely to do the most harm to the very people it is supposed to help. But don't worry, residents of 73111, the Overlay is not permanent. As soon as you clean up your act, the city promises to stop punishing you. 

Mike Davis is Research Fellow at 1889 Institute. He can be reached at mdavis@1889institute.org.

The opinions expressed in this blog are those of the author, and do not necessarily reflect the official position of 1889 Institute.


Popular posts from this blog

Undo 802

Why is it that when conservatives suffer a major loss, they give up, accept the new status quo, and fall back to the next retreat position? When progressives suffer a major loss, they regroup and try again. And again. Until they finally wheedle the American public into giving in. I propose a change in strategy. The Oklahoma Legislature should make undoing State Question 802 its top legislative priority for 2021. This will not be an easy task (legislators seem to prefer avoiding difficult tasks) but it is a critical one. The normal legislative process, with all its pitfalls and traps for the unwary, will only bring the topic to another vote of the people. So why spend so much political capital and effort if the same result is possible? Three reasons.   First is the disastrous consequences of the policy. Forget that it enriches already-rich hospital and pharmaceutical executives. Forget that it gives the state incentives to prioritize the nearly-poor covered by expansion over the des

Licensing Boards Might Violate Federal Law: Regardless, They Are Terrible Policy

Competition is as American as baseball and apple pie. “May the best man win” is a sentiment so old it doesn’t care about your pronouns. The beneficial effects of competition on economic markets are well documented. So why do we let powerful business interests change the rules of the game when they tire of competing in the free market? Most of the time when an occupational license is enacted, it is the members of the regulated industry who push hardest in favor of the license. Honest competition may be fundamentally American, but thwarting that competition through licensing seems to be fundamentally Oklahoman. Oklahoma doesn’t have the most occupational licenses, but when they do license an occupation, the requirements tend to be more onerous than the same license in other states. But what if, instead of merely breaking the rules of fair play to keep out would-be competition, Oklahoma licensing boards are also breaking the law? Normally a concerted effort to lock out competition would v

Cronyism: Feature, Not a Bug, for Used Car Dealer Licensing

Used car dealers in Oklahoma are governed by the Oklahoma Used Motor Vehicle and Parts Commission (UMPV). Like most licensing boards, it is made up of industry insiders. The UMVP's stated mission is to protect consumers from harm, but its structure and history indicate that its primary concern might be protecting licensed dealers from competition. This, of course, is the prime directive of all licensing boards. My recent paper deals with the licensing of used car dealers.   The person hit hardest by this is the hobbyist, especially in times of economic turmoil.   Imagine someone stuck at home due to coronavirus. We'll call him Frank. He can’t work due to the economic shutdown. Unfortunately, Frank’s lack of work does not mean he no longer has to put food on the table for his family. Fortunately for him, he is able to find a good deal on a used car that needs a little work. Frank has all the tools and garage space necessary to fix up the car and isn't violating any quar

The Real Reason Health Care Prices Keep Rising

Much has been made of the healthcare crisis of late, but very little of it addresses two of the biggest financial problems with the system: the third party payer problem and the reality that health insurance bears no resemblance to true insurance.   Insurance is a pooling of risk. The odds are that just over one in every 250 people will contract cancer in the next year. Cancer is an incredibly expensive disease to treat. So if 250 people got together and put aside enough savings to cover one case of cancer between them, they have effectively pooled their risk, and, on average, they should have enough to cover the statistical cancer they as a group are likely to incur. This risk pooling works better in larger numbers. A statistician would be unsurprised if one group of 250 had four cases of cancer while three others had none. But a single group of 10,000 people is much more likely to remain near the nationwide average, and if each of the 10,000 people pays just a little extra,