Friday 10 July 2015

Fizzed out

The New Zealand Taxpayers Union have published a snappy report about sugar and fizzy drink taxes which is worth a read. It includes some new data about the soda tax in Mexico and a foreword by yours truly. The foreword reads:

If you regularly consume more calories than you expend, you will get fat. This is a simple truism, but beneath it lies a web of complexity. There are thousands of food products and thousands of ways to be physically active. People live under different circumstances, in different environments and have different tastes. It would be absurd to blame a single ingredient, let alone a single product category, for the rise in obesity that has been witnessed around the world. Nevertheless, that is what single issue pressure groups like FIZZ have sought to do. This excellent report shows why their campaign to use tax as a weapon against sugar is dangerous nonsense.

The shipwreck of the Danish fat tax should be the world’s lighthouse in regard to health-related taxes on food and drink. All the unintended consequences associated with them were on display in the fifteen months of this ill-fated experiment. The impact on fat consumption was trivial and the effect on obesity was non-existent. Danish consumers switched to cheaper brands of the same products and bought them from cheaper stores, sometimes in cheaper countries. Inflation rose, jobs were lost and people on low incomes suffered most severely from the rising cost of living. Little wonder, then, that the tax was swiftly repealed by an overwhelming majority in the Danish parliament in 2012.

There are important lessons here but if the ‘public health’ lobby has learned them it is only so they can repeat them exactly, this time with sugar. There is no reason to expect a different outcome.
As numerous studies have shown, people tend to be flexible in how much they are prepared to pay for the food and drink they enjoy. They would sooner make sacrifices in other areas of the household budget than change their eating habits. The Danish experience is not unique in demonstrating this. The evidence from the USA, where a number of states have introduced soda taxes, tells the same story.

Faced with a dismal record of failure in the real world, campaigners for food and drink taxes have retreated into a world of statistical models in order to prove that policies which don’t work in practice can be made to work in theory. But there is no running away from the facts outlined in this report. Taxing fat, sugar or soda is an effective method of raising government revenue precisely because people keep on buying them.

A sugar tax is attractive to politicians because it allows them to engage in mass pick-pocketing with a sense of moral superiority. They need to be reminded that there is nothing moral about introducing a regressive stealth tax when you know that demand is inelastic. Taxing food and drink won’t make the poor healthier, but it will certainly help to ensure they stay poor.

It is not good enough to say that anything is worth a try in the campaign against obesity. A policy that is known to incur significant costs without reaping any measurable rewards is a policy that should be rejected without a second thought.

Download it here.

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