Tax, Trade and Health Policy

Incentives to change behavior need to be targeted to be effective.

If this was to pass, I will be able to use the entire amount. This morning was a squat morning. Tomorrow is an off day and Saturday is a dynamic back and isometric core day. A tax incentive to go to the gym will not change my behavior. It will just increase my effective income.

I’m also at an age and physical condition where going to the gym won’t produce immediate changes to either my health outcomes or my health expenditures. Hell, I’m more likely to incur incremental medical expenses because I impinged my shoulder stabilizers than had a preventable heart attack in the next twelve months. Maintaining good conditioning and strength in my late thirties may have positive health and functional impacts in my fifties and sixties, but that pay-off is both probabilistic and deeply discounted.

To evaluate whether or not this is a good health expenditure, first we would need to assess how many new/incremental gym memberships/work-out regimes are bought and then how many incremental work-outs actually occur (as we don’t care about the substitution of someone changing from going on a walk around the neighborhood to watching TV on a treadmill at the local Planet Fitness). And then from there, we need to see how much health changes from the incremental work-outs. Or far more simply, we can evaluate it as a give-away to the upper middle class.

Now onto booze:

Kentucky makes a lot of bourbon. Bourbon is a targeted retaliatory tariff item because it makes the constiuents of the Senate Majority Leader worse off and their pain may actually create screams that a decision maker will hear and care about.

What does a trade-war targeting bourbon do to the number of DUI and injuries/deaths due to alcholol related crashes? As I see it in the short term, Kentucky distilleries had projected a certain demand for their slow to produce products. That demand was the sum of domestic demand and foreign demand at a given price. Now the tariffs are a shock. Foreign demand will go down significantly as bourbon is significantly more expensive than all other booze alternatives. Kentucky bourbon inventories will be higher than expected so distilleries will have several short run choices. First, they can cut future production or transform some of their projected 2019 seven year bourbon releases into eight or nine year bourbons. Secondly, they have the choice of paying to warehouse some of the unanticipated surplus or discounting it to get rid of the extra bottles on the domestic market. If there are bourbon discounts, we should expect some combination of consumers shifting from other booze types to the cheaper bourbon and some new consumption. We don’t care about the shift but we care about the increase in consumption due to cheaper booze. So will retaliatory bourbon tariffs lead to higher DUI and drunk driving crashes with injuries?






29 replies
  1. 1
    Downpuppy says:

    There’s a bourbon shortage. The only stuff on the shelves is expensive silly labels.

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  2. 2
    Yarrow says:

    A tax incentive to go to the gym will not change my behavior. It will just increase my effective income.

    How well do those incentives that some companies offer work? They usually offer you some discount on your health insurance per month if you do some health survey. Some also offer additional options to get other discounts by going to brown bag lunches on topics or whatever.

    Is the gym lobby well so well connected that they’re getting this giveaway pushed through Congress?

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  3. 3
    MomSense says:

    I might switch from the cheap gym back to the Y so kid can swim

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  4. 4
    MomSense says:

    @Yarrow:

    Paul Ryan won’t have his government funded gym to go to anymore.

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  5. 5
    Anonymous At Work says:

    Bourbon is too expensive to function as a good substitute good for increased consumption when the price goes down. We’ll only see shifting consumption choices, not a shift in demand. Further, we may see other effects shift consumption from other alcohols to bourbon due to relative scarcity overseas. So, I suspect that we’ll see little discount and more storage for longer aging times.

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  6. 6
    Scott says:

    This is ridiculous. Republicans just went through this charade to “reform” the tax code, to make it simpler. And then they turn right around to add a lot of bennies back in?

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  7. 7
    Felanius Kootea says:

    I have to say that I really like the way many of the retaliatory tariffs are aimed squarely at GOP lawmaker districts. Not sure if that make enough of a difference with respect to GOP lawmakers reining in #45.

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  8. 8
    sherparick says:

    @Yarrow: The answer to your second question is “of course, yes.” I think the Associationf of Fitness Studios fit the bill. https://member.afsfitness.com/

    I use to be an enthusiast about these programs. But the actual science, as opposed to the hype, indicate very little savings. https://www.sciencedirect.com/science/article/pii/S0749379713000123. I certainly wonder if they are worth the transfer of revenue from the Government to the corporate consultants who will operate these programs.

    Returning to a depressing subject, our President inherited a very solid economy with low relative private debt from his successor after the pain of the Great Recession and a slow, painful recovery from biggest housing crash since 1929-33. At least for 2018, and likely for 2020, Trump will have this goldilocks economy boosting Republicans and his own reelection chances.

    At least until the time the Federal Reserves interest rates increase puts the halt in the construction and purchase of new houses, the economy will continue to grow at a roughly 2 to 2.5% annual rate, which will allow the Orange Monster to claim all sorts of credit while doing medium and long term damage to the economy. (The biggest long term threat is ignoring human cause global warming, which is really starting to bite in the 1) record heat waves; 2) rising sea levels; 3) record wild fires; and 4) extreme storm events and flooding – as they years go by, insurance costs will rise (I already see this in my home owner’s insurance), bad loans on assets that get washed away, and higher food prices as droughts and floods both damage crops).

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  9. 9

    @Yarrow: Any of the broad workplace wellness programs suck goat balls if the objective is to lower costs by reducing chronic conditions. If the objective is to make sick people someone else’s problem, they work ok.

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  10. 10
    Gelfling 545 says:

    If, as usual, these write offs go only to people who itemize they will not be much use to those for whom fitness costs are otherwise prohibitive.

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  11. 11
    Roger Moore says:

    @David Anderson:

    Any of the broad workplace wellness programs suck goat balls if the objective is to lower costs by reducing chronic conditions.

    I’m glad to see this blog sticking to careful technical terminology to discuss important topics.

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  12. 12
    Felanius Kootea says:

    @Felanius Kootea: Ugh can’t type this morning. I meant not sure if that will make enough of a difference.

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  13. 13
    lynn says:

    There will be no extra bottles in the market place. Some venture capitalists are preparing to buy those bottles, store them, and keep them off the market until the capitalists are positive of a profit.

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  14. 14
    Snarki, child of Loki says:

    Trump is President.

    Drink like you mean it.

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  15. 15
    ant says:

    they have the choice of paying to warehouse some of the unanticipated surplus

    seems to me that storing extra isn’t a big problem. temps don’t need to managed at all with booze in a barrel. it doesn’t freeze, and high temps doesn’t hurt it either.

    it becomes more valuable the longer it’s aged.

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  16. 16
    Gin & Tonic says:

    @Roger Moore: This Anderson guy is a real disappointment, huh? I bet Mayhew would have said it better.

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  17. 17
    Gin & Tonic says:

    @ant: Up to a point. First of all, there’s volume loss every year it’s in the barrel (the “angels’ share”) and second, it’s not guaranteed to improve. I’ve had very expensive very old bourbon, and I can’t say that it was better at 23 than it was at 18.

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  18. 18
    Brachiator says:

    @Scott:

    This is ridiculous. Republicans just went through this charade to “reform” the tax code, to make it simpler. And then they turn right around to add a lot of bennies back in?

    Politicians regularly promise tax reform, tax reduction, and tax simplification. They are not the same thing. And this new tax reform is a sham. Trump promised and got a new “postcard” Form 1040. By creating six new schedules to show the stuff that used to be on the old two page form. And the one part that really is simple is that wherever rich people can get a tax break, well they got a tax break. Simple.

    @Gelfling 545:

    If, as usual, these write offs go only to people who itemize they will not be much use to those for whom fitness costs are otherwise prohibitive.

    Yes!

    Of course, they could make this an adjustment to income, or a pre-tax dollars benefit.

    This proposed tax break seems to be part of a strange, ignorant conservative mind set that if you need medical care, you must not have lived your life right.

    Buncha dopes.

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  19. 19
    cmorenc says:

    @David Anderson:

    Maintaining good conditioning and strength in my late thirties may have positive health and functional impacts in my fifties and sixties, but that pay-off is both probabilistic and deeply discounted.

    Actually, it will pay HUGE dividends in 20-30 years – and (especially here in central NC) you are surrounded by convincing informal proof anytime you go out in public. Look around at folks of either sex aged apx 50 and up – it’s very obvious which folks maintained a somewhat disciplined habit of maintaining themselves in good physical shape via exercise and diet, and which folks did not.

    Also, take me as a sample of one – I am 69yo, and have maintained a membership in the Triangle YMCA (which has nice gym facilities) since I was about your age, and throughout the years, have maintained a regular habit of going there two to five times per week for workouts. That discipline has kept me in remarkably good shape for a man my age, as has sticking with soccer refereeing (though especially since a knee replacement 3 yr ago I’ve had to cut back the competitive and age level from what it was 8-10 years ago).

    Another eclectic, but telling small sample is when I went to my 50th high school reunion last October – it was VERY obvious who had established decades-long habits of maintaining themselves in decent physical shape, and who hadn’t. Some of my classmates I hadn’t seen in decades, and until that night still had in mind images of their youthful, slender selves – the ones who’d kept themselves up looked 68 going on 48, the ones who hadn’t looked like 68 going on 80+.

    You get the point. The payoff is quite concrete, albeit it doesn’t really show dramatically until a decade or especially two down the road from the age you are now.

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  20. 20
    Yarrow says:

    @David Anderson: Thank you. I think you’ve written about that before, but I couldn’t remember offhand this morning.

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  21. 21
    Joel Ellingson says:

    Would you have to make enough money or have enough other deductible expenses to exceed the threshold above the new standard deduction? If so, then we’re back to something that primarily benefits individuals who likely already have the discretionary income to belong to a gym.

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  22. 22
    JustRuss says:

    @Joel Ellingson: I will be very, very surprised if the answer isn’t “yes”. Because:
    a. Our government is currently controlled by rich assholes.
    b. That’s how 99.9% of deductions work.

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  23. 23
    Kelly says:

    Maintaining good conditioning and strength in my late thirties may have positive health and functional impacts in my fifties and sixties, but that pay-off is both probabilistic and deeply discounted.

    At 62 I the payoff is here for me. I took up lap swimming and yoga for endurance and flexibility starting in my late 20’s. Watched friends start sinking into their chairs in their 40’s. They lost the will to escape. Many of my current buddies are Nordic skiers well into their 70’s and still going strong.

    I wonder if season ski passes, golf memberships will qualify for the incentive.

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  24. 24
    TenguPhule says:

    @David Anderson:

    If the objective is to make sick people someone else’s problem, they work ok.

    That’s the GOP plan.

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  25. 25
    TenguPhule says:

    @lynn:

    Some venture capitalists are preparing to buy those bottles, store them, and keep them off the market until the capitalists are positive of a profit.

    So they plan to lose money then. Good.

    There is no shortage of booze to choose from these days.

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  26. 26
    Roger Moore says:

    @ant:

    seems to me that storing extra isn’t a big problem.

    It is when your warehouses are full and you need to build more to store more. And it is when you have a lot of capital tied up in your bourbon and your business plan depends on getting that money back on a specific timetable to pay your workers and distill the next batch.

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  27. 27
    Shana says:

    @Scott: It’s almost like they weren’t serious about most taxpayers the first time around. I know, shocking to think of. //s

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  28. 28
    Shana says:

    @ant: Unless your warehouse collapses. Which I read really happened recently.

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  29. 29
    nasruddin says:

    I LOVE tax simplification!

    ReplyReply

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