Britain is about to find out that its “sugar tax” isn’t as sweet a deal as it sounds.
Last week, Chancellor of the Exchequer George Osborne announced that Britain will soon join a handful of places around the world in imposing a special tax on soda and other sugary beverages.
Public-health advocates cheered the news. Celebrity chef Jamie Oliver did a jig on TV; former New York mayor Michael Bloomberg tweeted that it “puts the UK at the forefront of the global fight to reduce obesity & diabetes.”
And why not cheer? The tax certainly sounds like a bargain. It will raise the price of most sugar-sweetened beverages by a modest amount — 18 or 24 pence (about 26 or 34 cents) per liter, depending on sugar content — and, its backers promise, painlessly melt inches off the citizenry’s waistlines.
But as easy as it is to scapegoat the “empty calories” of a Coke, taxes such as this one — and similar ones proposed for the United States — will likely do little to slim down the populace.
That’s because a lot of things have to go right for a soda tax to reverse rising obesity rates.
First you have to assume that the tax will be passed on to consumers, rather than absorbed by suppliers through narrower profit margins.
Then you have to assume that consumers are really price-elastic — econo-speak for price-sensitive — when it comes to sweetened beverages.
There’s conflicting evidence on this. One recent study found that price elasticity for soda has been greatly overstated; that is, small price increases don’t change purchasing decisions much, especially among the poor, who seem to have strong preferences for soda. As a result, soda taxes end up being highly regressive without meaningfully changing behavior in the population with the highest obesity rates.
But let’s assume that earlier research, which finds greater price sensitivity, was right.
One 2013 British Medical Journal study that’s been cited by sugary-beverage tax advocates suggests that a levy about the size of Britain’s would indeed change behavior measurably — by reducing the average Brit’s daily calorie intake by a whopping two calories.
And even that estimate is probably inflated, given that it’s based on another optimistic assumption: that consumers nudged by the tax to drink less soda and other targeted beverages won’t satisfy their sweet-tooth cravings elsewhere.
That is, the study (as well as others like it) assumes these customers won’t replace their usual Sprite purchase with a Snickers bar, or even a butterscotch latte or chocolate milkshake (which, because they’re milk-based, will be exempted from Britain’s tax).
Instead of arbitrarily singling out one category of bad foodstuff for taxation — and the categories of bad foodstuffs will always be somewhat arbitrary — a more effective route to reducing consumption of excessive sugar or calories might be a universal, graduated sugar or calorie tax.
But even that still doesn’t quite seem fair or, for that matter, efficient. After all, a calorie tax would also hit people who consume more calories because they are very active, such as marathoners. Besides being regressive, a tax on calories or sugar would also effectively, if unintentionally, make it more expensive for trim people to exercise.
In other words, a lot of inputs go into determining whether a person is obese. Taxing some of those inputs distorts the relative prices of those inputs, but it doesn’t necessarily change the desired output: obesity rates.
Which raises the question: Why not just target the output, rather than some random subset of inputs? We could tax obesity if we wanted to. Or if we want to seem less punitive, we could award tax credits to obese people who lose weight. A tax directly pegged to reduced obesity would certainly be a much more efficient way to achieve the stated policy goal of reducing obesity.
Of course, “fat taxes,” even when framed as weight-loss tax credits, seem pretty loathsome. Why is . . . unclear.
Maybe it’s because they’re regressive (but so are soda taxes). Maybe it’s because it sounds like we’re shaming fat people (but arguably so does any policy aimed at reducing obesity). Maybe it just feels unfair to tax people based in any way on their genes, which, like diet and exercise, can also be a determinant of weight.
But if we assume it’s impossible for obese people to lose weight by any combination of inputs they do have control over, it’s hard to simultaneously argue that making one of those inputs more expensive could lead to some nationwide weight-loss miracle. Pop goes the pop-tax rationale.