Sin taxes and the poor

The Tories' regressive sugar tax begins tomorrow and so the Lancet (a student union magazine masquerading as a medical journal) is trying to seize the narrative by devoting a whole issue to the wonders of taxation. As with the Gates-funded Telegraph advertorial published last week, it frames sin taxes around the silly panic about 'non-communicable diseases'.

One of Bloomberg's minions has written the main editorial. Absurdly, he claims that sin taxes do not disproportionately hit the poor. On the contrary, he says, people on below-average incomes benefit the most from them.

I have written a rejoinder for Spectator Health.

A key reason why such taxes are unpopular is that they are regressive. Excise taxes on everyday products almost invariably take a greater share of income from the poor than from the rich. Taxes on tobacco, fast food and soft drinks are doubly regressive because people on below-average incomes tend to consume more of them in the first place.

This is not a notion that is ‘outdated, misleading, or simply wrong’. It is a demonstrable fact. In Britain, the poorest decile spend 34 per cent of their disposable income on indirect taxes, including 2.9 per cent on tobacco duty and 2.0 per cent on alcohol duty. For the richest decile, the equivalent figures are 14 per cent, 0.1 per cent and 0.9 per cent respectively. There is no doubt that the sugar tax will be similarly regressive when it comes into effect on Friday.

If you were employed by one of the world’s richest men to lobby for higher taxes on the poor, you might start to wonder if you were one of the baddies. Summers’ editorial seems designed to help him and his readers sleep easier at night by redefining the meaning of the word ‘regressive’ and engaging in some wishful thinking about the efficacy of such policies.

Do have a read of it.