Incentives promote wellness better than ‘sin taxes’

Tax time has come and gone. Although dreaded, the process of collecting documents and receipts can be helpful in examining expenses, and therefore priorities. How we spend money as individuals declares our interests, and how we collect money as a society also communicates our society’s priorities.

Fiscal policy promotes behavior as well as discourages it. For instance, certain tax policies encourage charitable contributions and home ownership, both of which society believes helps fill a societal good. In health and wellness, however, most tax policies are punitive in nature — they discourage behavior by specifically penalizing individuals financially if they engage in certain behaviors. The most common examples are so-called “sin taxes.” These excise taxes are imposed on goods that legislators and policymakers believe are bad for individuals and society.

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The best-known example is the tax on cigarettes. Numerous studies, including a recent one published in the International Journal of Environmental Research and Public Health, revealed that these taxes are particularly effective for reducing smoking in teens, young adults and those of low socioeconomic status. In recent years, we have also seen taxes on alcohol to promote responsible drinking, as well as soda taxes to help prevent childhood obesity. The data on the effectiveness of these taxes are less clear-cut.

Nonetheless, these types of taxes are important and useful tools in addressing health issues. But they should not be the only, or necessarily the primary, fiscal policy to promote health and wellness. Instead of only directing tax policies at individuals, we also must develop fiscal policies that encourage communities to incentivize businesses to bring needed resources that correlate to improved health.

Former Speaker of the House Tip O’Neill famously quipped, “All politics is local” — and in many ways, health and wellness is local. We need to recognize that wellness is not only the responsibility of individuals and health professionals, but of the entire community — schools, businesses and local government. The more local policymakers can incentivize behaviors that promote health, the more likely local citizens will see improvements in rates of disease and life expectancy. Instead of simply relying on tax policies that impose a financial penalty to discourage behavior, we need to create innovative policies for a community to encourage healthy behavior, or at least be able to make a healthy choice.

For instance, private activity bonds could be a useful method to promote health. How so? These bonds are issued by or on behalf of local or state government for the purpose of financing the project of a private user. One reason childhood obesity has been increasing dramatically, especially in minority populations, is the lack of access to healthy food — what are known as “food deserts.” That doesn’t mean there is no food available; rather, there is an abundance of corner stores in these neighborhoods that lack fresh, healthy foods.

Because we know that access to healthier foods corresponds to healthier eating and lower risks of obesity, local communities could use these bonds to incentivize supermarkets to come into these underserved neighborhoods. The same could be done to encourage doctors’ offices, labs and imaging services that typically do not set up shop in the areas where they are often needed the most. Local communities could also develop tax incentives for construction companies to build playgrounds, or fitness centers to upgrade school gyms. By offering financial and even tax incentives to these companies, we can encourage actions that would enable healthier lives for the public.

Keeping individuals or neighborhoods healthy isn’t always about penalizing what’s bad. It’s also about rewarding what’s good, and encouraging such behavior through innovative fiscal policies aimed at both individuals and communities.

And that could make “tax time” a far more pleasant experience.

Whyte is a founding board member of the Campaign to End Obesity. Daschle is a former Senate majority leader and a senior policy adviser at DLA Piper.