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

1889 Institute's Statement Regarding School Closures

The 1889 Institute, an Oklahoma think tank, has released the following statement regarding Joy Hofmeister’s proposal to keep schools closed for the remainder of the school year. We at the 1889 Institute consider Joy Hofmeister’s proposal to close Oklahoma’s schools for the rest of the school year a gross overreaction to the coronavirus situation. Even in the best of times and circumstances, suddenly shifting every student in the state from traditional classrooms to online distance learning will have negative educational consequences. This in addition to the economic burden on two-earner families forced to completely reorder their lives with schools closed. We believe many of our leaders have overreacted to worst-case scenarios presented by well-intended health experts with no training or sense of proportion in weighing the collateral damage of shutting down our economy versus targeting resources to protect the truly vulnerable. We say reopen the schools and stop the madness. ...

Can Government Force You to Close Your Business?

1889 Institute takes no position on whether any or all of these measures are warranted or necessary, or whether their economic fallout would inflict more human suffering than they prevent. We are simply evaluating whether they are legal.   With the unprecedented (in the last 100 years at least) reaction surrounding the outbreak of Covid-19, questions that few living legal scholars have considered are suddenly relevant.   Can a quarantine be ordered?   Can a mass quarantine, lockdown, or “cordon sanitaire” be ordered? Can businesses be ordered to change their behavior?   Can businesses be ordered to close? Can state governments order these measures? Can local governments order these measures? My legal brief addresses these issues from a statutory point of view; it is clear that state law gives the governor and mayors broad authority in a state of emergency. They must, of course, do so in a neutral way that they reasonably believe will help preve...

Lack of Action from Oklahoma’s Occupational Licensing Advisory Commission

Apparently, if you’re a legislator in Oklahoma and want to look like you’re doing something about an issue while not actually doing anything at all, you pass a bill to create a commission to study the issue. At least, that’s how the Oklahoma Occupational Licensing Advisory Commission (LAC) has operated so far. According to a study I did while at the Goldwater Institute, Oklahoma ranked as the 24 th most-licensed state. A study by the Institute for Justice ranked Oklahoma 35 th in how broadly and onerous its licensing laws are. But these, and similar studies, are really just counts of how many occupations states license, so they leave out a lot of nuance. The Institute for Justice’s report does add some nuance, reporting that by its standard of measure, Oklahoma ranks 18 th in how burdensome are its licensing laws. That is an important piece of information. On the one hand, according to the Institute for Justice, Oklahoma’s licensing laws cover fewer occupations than in ma...

A Plan to Put Teachers in Charge, Give Parents Choices, and Benefit Children

How much confidence would you have in a law firm that was managed and run by legal secretaries and paralegals? Probably not a lot. Legal support staff constitute a vital part of their firms. A good paralegal can free an attorney to focus on the things only she can do. A bad paralegal can be worse than no paralegal at all. But even the best paralegal lacks the training and experience to formulate and execute a litigation strategy. You don’t want a paraprofessional running the show - their proper role is in support of the professional. So why aren’t teachers running our schools?   The prevailing education model in this country is puzzling when compared to other industries. But it’s been this way so long it’s difficult to imagine anything else. We group children by age, not by knowledge or ability. We send them to schools based on address, not teaching methodology. Parents, except for the wealthy, have very little say over which school their children can attend. And teachers, the prac...