Polity: Fizzy drinks: Tax or no tax?

• notices and features
• 10 years ago
• Categories: food, health, tax
• Tags: polity

The original of this post is here at Polity.

There has been some discussion recently about whether we should tax fizzy drinks as a threat to public health. Otago University public health people say yes. Various anti-tax groups say no. Here’s my 2c:

1. The principle is sound

If people are going to make choices that end up costing the public money – in this case healthcare money as a result of severe disease or earlier onset chronic disease – then the community can and should take steps to discourage those choices. That is what we already do with tobacco and alcohol, and for the same reason.

Study after study has shown that price signals (e.g. taxing a product) are more effective than public education campaigns at discouraging consumption.

The reason to restrict this particular choice is to save the government money, thereby keeping other taxes lower than they otherwise would be. That allows people keep more of their money, which they can then use to make more choices.

2. The devil is in the detail

As with all behaviour-based taxes, the difference between success and failure lies in how you design and implement the program. Without seeing a particular proposal, it is hard to come down firmly in support or against just yet.

So I am interested-but-undecided at this stage.

3. The Danish example is a red herring (Ha – herring!)

Denmark was the first country ever to try a tax targeted at unhealthy food. It had real problems, didn’t last long, and they withdrew it in 2012. Many opponents of a fizzy drink tax say Denmark’s failure shows these things simply can’t work. It shows no such thing:

• The biggest problem with Denmark’s regime was that people would just drive over the border to Germany and buy their fatty foods there. For obvious reasons, that is not a big problem in New Zealand.
• The Danish tax was very broadly targeted (anything with high saturated fat), so it caught la-de-da Danish bleu cheese as well as kegs of Coke. New Zealand’s proposal, however, could more narrowly target some of the foods most commonly consumed by children (see below).

4. Answers to oft-asked-yet-silly questions

How dare you plot to remove a person’s right to make choices about their own bodies?

First, these choices have externalities that the whole community has to cover with tax dollars. They are not purely individual choices. Second, the program is aimed at products disproportionately consumed by children, who even libertarians agree are not capable of making fully rational choices.

Isn’t this just a halfway house towards your goal of banning booze, smokes, Coke, and anything fun?

Do you think a caucus containing Trevor Mallard, Shane Jones, and Grant Robertson will ever ban any part of a rum and Coke? No. Speaking of banning fun, though, I think we should hear more about National’s plan to liberalise weed. What, there isn’t one? Because the MPs are all conservative and judgy about that kind of fun? Huh.

Aren’t you just punishing the poor?

No. We would be encouraging heavy consumers of very high sugar drinks – whether rich or poor – to choose something else at least part of the time, in the interests of saving public health money. And we would be rewarding them with a lower relative price when they do. Unless you believe the poor are incapable of responding to price signals or of changing their beverage choices, there is no punishment involved.