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

No License, Sherlock: Licensing for Private Investigators

What does a private investigator do? Surely, we’re all familiar with various movies and shows featuring the exciting adventures of Sherlock Holmes or Magnum PI. However, reality is often disappointing, and the fact is private investigation is usually dull and relatively safe. Private investigators are tasked with conducting surveillance and fact-finding missions for their clients, but they gain no special powers to do so.  My recent paper deals with the licensing of private investigators. Oklahoma’s private investigator licenses are governed by the Council of Law Enforcement Education and Training (CLEET), which follows the advice of a committee made up of people who run private investigative agencies. Improved competition is not likely to be in the best interest of these agencies, so it is questionable whether they should be in a gate-keeping position they could easily turn to their advantage. Private Investigators must undergo a series of trainings and pas...
Read more

Present Reforms to Keep the Ghost of State Questions Past from Creating Future Headaches

Oklahoma, like many western states, allows its citizens to directly participate in the democratic process through citizen initiatives and referendums. In a referendum, the legislature directs a question to the people — usually to modify the state constitution, since the legislature can change statutes itself. An initiative requires no legislative involvement, but is initiated by the people via signature gathering, and can be used to modify statute or amend the constitution. Collectively, the initiatives and referendums that make it onto the ballot are known as State Questions.   Recently, there have been calls to make it more difficult to amend the constitution. At least two proposals are being discussed. One would diversify the signature requirement by demanding that a proportional amount of signatures come from each region of the state. The other would require a sixty percent majority to adopt a constitutional amendment rather than the fifty percent plus one currently in place. ...
Read more

Intellectual Corruption in Public Schools Exposed by COVID-19

Oklahoma is opening up in stages at last, thank goodness. While we have thought, from the beginning, that shutdowns have been a bad idea, what’s done is done. Now is the time to start recovering, and the faster we get fully re-opened (with prudent precautions for the vulnerable, of course), the better off we will be. Luckily, we are in the United States; the economic damage done here by shutdowns will be far less deadly than in poorer nations as global poverty is expected to increase for the first time since 1998 due to imprudent shutdown orders. And speaking of imprudent shutdown orders, none have been more imprudent than closing Oklahoma’s schools for the last 9 weeks (practically a full quarter) of the year. Action on the part of state leaders was so precipitous that, while we could be talking about re-opening schools to salvage at least part of the lost educational time, it is not now possible . And of course, we now know children were at low risk from the virus and that ...
Read more

More on Why Oklahoma Should Have Already Fully Opened

Governor Stitt has declared that some businesses can open on Friday. By May 1, all enterprises in the state will be able to operate more or less normally. Eventually, at some unspecified date, Oklahoma will be fully operating again. But the question remains, and must be asked, “Was the shutdown and extreme social distancing even necessary?” For several reasons, the answer is a clear and unequivocal “No.” Let’s start with this little gem from a blog by an Oklahoma State University academic. “Harvard University epidemiologists determined that continuing extreme social distancing measures into the summer months could actually result in more COVID-19 deaths than a ‘do nothing from the beginning’ alternative.” Now, it might sound like this only confirms the decision to open up now and not extend the shutdown into the summer. But in fact, the Harvard study has a lot more to say about how this epidemic has been handled than might immediately be obvious. The Harvard study recom...
Read more