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Candy Corn and Coke

A “sin tax” on soda “is an idea we should be exploring,” President Barack Obama told Men’s Health magazine this summer. But even as the Senate Finance Committee holds hearings, the Congressional Budget Office issues revenue projections, and senators speechify, Congress can’t quite bring itself to impose a tax on soda. And after the Men’s Health interview made (mostly negative) headlines, the White House backed off the idea too, with a spokesman saying it is “not something we’ve proposed” and an administration officials telling reporters he’s “not going to do so.”

What’s with the schizophrenia on soda taxes? Blaming an abundance of cheap high-fructose corn syrup–the sweetener in most American non-diet sodas–for the obesity epidemic has become a national pastime. The argument in favor of taxes goes like this: Increasing the cost of a can of Coke will nudge soda drinkers to make healthier choices on the margins. The folks who choose to buy soda anyway will defray some of the inevitable obesity-related health expenses by handing over a little extra cash to Uncle Sam. It’s a win-win, less obesity up front and more money to pay for diabetes treatment down the line. Yet proposals at the federal level seem perennially stalled at the “exploring” stage.

Meanwhile, as the debate over soda taxation drags on, the U.S. government continues to subsidize the very industry it wants to scapegoat. American corn farmers are raking in billions of subsidies from the federal government, which allows them to sell the vital component of corn syrup cheaply. And all the while, activists, journalists and congressmen fret over the damage done by cut-rate sweetener.

From an outsider’s perspective, it looks as if the governmental left hand doesn’t know what the right hand is doing. But in the perverse logic of the American legislature, this giveth-taketh-away dynamic makes perfect sense. The goal isn’t necessarily to create efficient, coherent policy. It’s to publicly, noisily “do something” in response to a national problem.

On one hand, as Obama rightly points out in the Men’s Health interview, “there is resistance on Capitol Hill to those kinds of sin taxes. Legislators from certain states that produce sugar or corn syrup are sensitive to anything that might reduce demand for those products.” When corn subsidies (and accompanying tariffs on imported sugar) were instituted seven decades ago, it was a response to the terror of debt-ridden farmers worried about their livelihood. Since then, Iowa has been cheerfully mainlining government cash and voting for whoever promises to send more of it.

Subsidy packages to corn growers have been sweet in recent years, with an average of about $5 billion annually since 1995, and a bumper crop of cash in 2005 clocking in at about $9.4 billion. Many of the acres of corn grown in the United States wouldn’t be profitable if it weren’t for federal subsidies (as chronicled in the excellent documentary King Corn), yet those billions keep the cheap corn piling up around our waists.

But on the other hand, debt-ridden congressmen are now terrified for their livelihoods. They’re desperate for a way to fund healthcare reform–and taking credit for solving the obesity problem would be nice, too. So the Senate Finance Committee held hearings this spring to brainstorm some ways to gin up some cash. One of the proposals they entertained was a 3 cent tax per 12 ounces of soda, which would generate $24 billion over four years, according to a December report from the Congressional Budget Office.

The application of a little basic math reveals an interesting coincidence: The expected revenue from a soda tax and the expected subsidy payments to corn farmers come to almost the same amount–somewhere between $5 billion and $6 billion a year.

It’s not like soda is currently tax free. There are levies on soda or junk food in 40 states. This, at least, makes a convoluted kind of sense. It’s just a transfer from the feds to the state coffers–albeit an astonishingly inefficient one. Last month, San Francisco mayor Gavin Newsom moved to impose a fee on stores for selling sugary drinks. Newsom admitted his plan was probably illegal and said, “We know we’ll be sued. But I really believe this is important to do.” In December, newly minted New York Gov. David Paterson proposed a 18 percent tax on full-sugar soda, which was later shot down. If the feds are leaving cash on the table, the states are happy to pick it up. Especially as their own budget crises rage.

There are reasons to be skeptical of claims that corn syrup soda is single-handedly turning American into a nation of tubbies (I address many of them here.) But if you think it might be a good thing overall for a soda to cost an additional penny or two, it would be far more efficient to kill the subsidy than pass a new tax.

Rather than abolish corn subsidies and using that money to fund healthcare reform, Congress prefers to work at cross purposes with itself. The culture of logrolling (cob-rolling?) dictates that the farm-state senators get their subsidies and healthcare reformers get their tax. That way, everybody wins. Well, everybody except taxpayers, who get screwed coming and going.

Katherine Mangu-Ward is a senior editor at Reason magazine.