Crampton on sugar taxes

Eric Crampton writes:

Sugar taxes of 10 or 20 per cent – the range usually advocated – simply do not affect consumption very much.

Everybody talks about how tobacco taxes have cut tobacco consumption, but let’s be realistic.

The tax on a single cigarette stick is $0.83. The cheapest cigarettes I can find online are Easy Reds, at $19.90 for a pack of 20.

Each of those then has 17 cents of tobacco, and 83 cents of excise. That isn’t a 10 or 20 per cent tax.

It is around a 500% tax. Now if the Government wants to proposed a 500% tax on soft drinks, so ahead and make my day!

Even if the government taxed sugar as heavily as it taxes tobacco, there is still another problem.

Until vaping, if you wanted nicotine, you had to buy cigarettes.

But there are all kinds of tasty and potentially unhealthy things out there that people could shift to if there were a tax on sugar.

The effects of tax on health would then be much smaller than you might think from a naive estimation from any reduction in sugar consumption. If people flip from chocolate bars to crisps, are they really that much healthier?

It would be like whack a mole as you keep finding more and more unhealthy things to tax.

Unsurprisingly, in the real world, sugar taxes have not done much to improve health.

But don’t just take my word for it.

The Ministry of Health commissioned the NZIER (New Zealand Institute of Economic Research) to review the literature on sugar taxes around the world.

NZIER found little effect of sugar taxes on consumption, and no evidence of health benefits.

And documents released to the New Zealand Initiative by the Ministry of Health showed that the ministry had reached a very similar conclusion about sugar taxes, advising the minister that there is “insufficient evidence that a sugar tax would be effective in reducing obesity”.

The ministry also warned that the quality of evidence presented in favour of sugar taxes “is a major concern”.

At best the evidence is that a tax on certain items may reduce consumption of those particular items. Nowhere has it been found that actual obesity levels have reduced.