The prospect of a Michael Bloomberg presidential run may be fading, but the specter of tax hikes on sugary foods and beverages is ever-looming. In a move that Bloomberg View hopes will impact other governments worldwide, George Osborne, the British Chancellor of the Exchequer, announced last week a two-tiered sin tax hitting high-sugar British beverages in 2018. While the exact tax rate has not yet been announced, the Office for Budget Responsibility predicts it could raise prices on some beverages by up to 80 percent. However, skyrocketing prices are not even the largest problem with this proposal. My main concern is that the tax will more likely achieve harmful unintended consequences than the beneficial intended ones. There are limits to what government can accomplish, and the best intentions of tax-tinkerers such as Osborne and Bloomberg don’t compensate for disastrous results.
The logic of a sin tax is tempting: Sugar consumption is a major factor in causing obesity, which is not only a considerable health risk but also a drain on a nation’s health care resources. Higher prices for a product generally lower the demand for said product, hence the argument we should raise taxes to save the children and the nation from the perils of Big Gulp.
Few question a tax’s ability to lessen consumption. Mexico was able to reduce soda consumption by a respectable 12 percent after it introduced a similar scheme. This formula has also been replicated with some success in the alcohol and tobacco markets. Illinois successfully reduced drunk-driving-related deaths after imposing an alcohol tax in 2009, and cigarette taxes have achieved modest reductions in deaths related to smoking. However, the goal of sin taxes on sugar is to reduce obesity, not just consumption. Every citizen in Britain could swear off all soda tomorrow, but if they all switched to similarly unhealthy substitutes the obesity crisis still would not abate. The sugar tax is therefore not totally comparable to the more famous sin taxes. Drunk driving has but one easily identifiable and taxable source: alcohol. Obesity has several. Like a game of whack-a-mole, tamping down on one cause through excessive taxation won’t solve the problem, and nor will it stop another from springing up.
The saving grace of ineffective sin taxes is supposed to be their revenue-raising ability. If people don’t stop slurping liquid diabetes, this thinking goes, then at least we can raise some money off of them. This money can pay for valuable things; in the case of Britain’s proposal, it’ll double the funding for physical activities in schools. But the nobleness of the cause shouldn’t obscure the ugly feature of the plan. Sin taxes are highly regressive. In other words, they harm the poor far more than the rich. Poorer individuals spend a larger percentage of their income on food than the rich. Therefore while a tax on sugar might make only a negligible impact on the monthly spending as a percentage of overall income of a millionaire, the less wealthy will lose a much larger percentage of their income to the state simply for preferring Dr. Pepper to cucumber-infused water. This will happen regardless of whether or not an individual is even at risk of becoming obese. Given that this proposal may not achieve its stated goal of reducing obesity, it’s worth considering whether forcing the poor to bear the brunt of the burden is praiseworthy, patronizing or simply cruel.
This is not a libertarian case against all state-sponsored paternalism, or even all sin taxes. Rather, it’s a simple call for prudence in lawmaking. While alcohol and cigarette taxes have achieved some positive results, it should not be assumed these benefits would translate directly to sugar taxes and solve the obesity crisis. It should also not be assumed that the benefits of these sin taxes even justify their costs. Although people of course have the choice whether or not to purchase taxed products, it is concerning when any law adversely impacts the poor vastly more so than the rich. When overdone, sin taxes can even generate black markets and crime. New York City’s high cigarette taxes, for example, spur people to illegally sell loose, untaxed cigarettes, unnecessarily criminalizing a relatively trivial endeavor. Perhaps the wiser course of action for all governments to take would be to correct the defects with current sin taxes, rather than zealously create new ones.
There are numerous ways a government can attempt to reduce obesity (prohibit soda in public school vending machines, or incentivize biking to work, for instance). But a government cannot coerce its citizens into health, and when the costs of action are unknown or unpalatable, it should be hesitant to try. Britain is the latest example of a nation seeking to introduce such a scheme, but it won’t be the last. Our local, state and perhaps even the federal government will consider this option at some point as well, and we should be ready to resist when they do.
Matt Winesett is a Senior Associate Editor for The Cavalier Daily. He can be reached at m.winesett@cavalierdaily.com.
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