Sin tax or bucks for broccoli

Interesting (and short ~3 minute) NPR news segment on structuring incentives to get people to eat better.

They talk about two methods to encourage healthier eating:

1.  Pay people to eat healthy food (“bucks for broccoli”)
2. Charge more for unhealthy food (“sin tax” on junk food)

Experiments have shown that with method #1, people buy more junk food (using money saved from the cheap healthy food). But when the junk food itself is more expensive (as in method #2), people actually buy less of it.

Why? Because people are more responsive to price increases than price decreases. It seems that charging more for junk food (i.e. tax on soda) will be more effective than subsidizing healthy food.

But then this article came out in the Wall Street Journal this week, reporting that there is no change in soda consumption in states with a soda tax compared to states without a soda tax. This could be explained by the fact that the soda tax was small and hidden... it might be a different story if the tax is large and noticeable.

This brings up some questions… should we pay people for their healthy habits and charge people for their unhealthy ones? Pay people to exercise? Subsidize yoga? Fine people for smoking? Charge people for unhealthy food choices? Apparently GE charges their employees who smoke an extra $625/year!