Taxing Sugar and Salt Hurts the People it Aims to Help


By Thomas Walker

Following the introduction by the British government of a tax on sugary carbonated drinks in April 2018, intended to improve public health and combat obesity in children, some campaigners have started calling for similar taxes on a wider range of products.

NHS Chief Medical Officer Prof. Dame Sally Davies, described by the BBC as ‘Britain’s top doctor’, has called [1] for a tax on foods high in salt and sugar, as well as widening the current sugar tax to other types of drinks. The revenue from these taxes, she proposes, would go towards making fruit and vegetables cheaper for the consumer.

Dame Sally makes reference to children and low-income communities as the main beneficiaries of these taxes. Obesity, she says, is a “matter of inequality” that disproportionately affects poorer children and adults. She and others like her hope to make people healthier by discouraging the sale and consumption of unhealthy foods whilst encouraging healthier alternatives.

The most obvious problem with this reasoning is that low-income consumers are the ones who will be hit hardest by the tax. Personal habits, as Bake-off winner Nadiya Hussain points out in her amusing take on the sugar tax [2], are hard to break. Many, if not most, consumers will continue buying the same products as before at the new higher prices, leaving them with even less disposable income to spend on other things.

The fact that the current sugar tax managed to raise £154 million in extra revenue for the government in just six months is suggestive of the reality that consumer habits aren’t changing. In seeking to improve the lives of poorer children and adults the tax has instead simply left them with less money. Expanding the tax to other food and drink products is going to have a proportionately higher financial impact on the poorest people in the country.

Many soft drinks providers have tried to get around the tax by using alternative sweeteners in their products. This may seem like a good solution on the surface, but in reality it can end up being even more harmful. 

The popular sugar substitute aspartame, used in many of these products, has been accused of causing weight gain in consumers by increasing the body’s appetite for it and other sweet foods. It’s possible that artificial sweeteners could ultimately be worse for consumers’ health than the natural sugar they replace.

Expanding the use of alternative sweeteners to other foods and drinks would lead to a huge increase in their consumption at a time when their effects and benefits are still the subject of considerable debate.

Another issue with artificial sweeteners is the difference in taste that can result. Some providers, notably Lukozade, have seen a backlash from consumers over the change in the taste of their products following the introduction of the tax. This can also hurt sales and potentially put companies and jobs at risk.

The issue of taste leads into another significant, but often understated, problem with discouraging sugary food: the effect on people’s happiness. People consume these products because they enjoy them, and for many people that’s done in moderation as part of a balanced overall diet. It’s unreasonable to tell the sensible majority that they have to pay more for their favourite products, or have them fundamentally altered, because of a minority who consume them in excess. 

For children this is particularly pertinent. Sweet drinks and food are an important part of childhood; they create a lot of excitement and make effective rewards for good behavior. But even for adults, energy drinks, sweet snacks and salty foods play an important role in providing moments of relief and pleasure. 

Proponents of these taxes argue that their purpose is to improve the health and wellbeing of people, particularly poor people and children. The reality, however, is that they can end up causing more harm than they prevent in other ways. Wellbeing is not simply a question of diet, but also one of happiness, financial wellbeing and overall quality of life. The people best placed to make balanced decisions about improving their overall wellbeing are the people in question themselves, not the government.

If individual wellbeing is really what the government is interested in promoting, then taxes are not the tool through which to achieve it. Education and information are likely to be far more effective in changing consumer behavior without harming people in other ways. If the government really wants to help people, and isn’t just looking for an easy source of revenue, then they should trust consumers to make their own choices in their own interests, while campaigners should focus their efforts on informing and educating the public to help them make those choices.

[1] https://www.bbc.co.uk/news/health-46636422 – Tax junk food high in sugar and salt, says top doctor 

[2] https://www.bbc.co.uk/news/entertainment-arts-44417509 – Nadiya Hussain on the sugar tax, takeaways and Bake Off adverts

Minority leaders in Philadelphia speak up against the soda tax

As the Consumer Choice Center has been keen to point out in several articles and campaigns, additional taxes and levies on sugary drinks end up being regressive and hurting the very people they aim to help: minorities and the poor.

Now, minority leaders in Philadelphia, seeing the toll the taxes have had in their communities, are calling on the city to repeal them.

As reported in the Philadelphia Inquirer, black clergy leaders say the taxes are disproportionately hurting African Americans and the poor in the city.

“I don’t see how the tax, as it is constructed, can really effectively do what it is intending to do. We think it needs to be repealed and reconceptualized,” said the Rev. Jay Broadnax, president of the Black Clergy of Philadelphia and Vicinity.

Last year, Cook County, which includes Chicago, got rid of its unpopular 1-cent-an-ounce soda tax that its commissioners passed in November 2016 affecting 5.2 million residents.

The Philadelphia pastor said the 1.5-cent-an-ounce levy on sugary beverages, including diet soda, was having unintended consequences by saddling people of color, the poor and senior citizens with higher grocery bills, while dips in soda sales were hurting small neighborhood business owners.

“The way that it has worked out is that it seems to be hurting more than it’s helping,” Broadnax said.

When Philadelphia passed its soda tax in 2016, it was the largest U.S. city to implement such a fee. After the tax was implemented, shoppers chose to cross the city limits to purchase their sugary drinks, something we have also seen in places like Seattle and Chicago.

Former New York Mayor Michael Bloomberg, the architect of soda tax campaigns across the country, spent over $1.6 million in Philadelphia alone to help pass the tax. During that year, he also dropped $18 million in Oakland and San Francisco.

As I pointed out in my Washington Examiner article last year, Bloomberg is no doubt driven to do good. But whether soda taxes are the tool to help reduce obesity remains to be seen.

Though Bloomberg’s project represents a noble goal – reducing childhood and adult obesity – its actual impact is to make already low-income people poorer, and hasn’t yet produced any clear results on obesity.

In the case of Mexico, the largest jurisdiction which passed a tax on sugar-sweetened sodas in 2014, it’s quite clear that sales of sodas dropped as a result of the tax.

However, as Mexican researchers learned once they broke down the figures, low-income households paid a higher proportion of the soda taxes overall.

This likely means that soda taxes deterred higher-income individuals from buying and consuming soda, but not lower-income individuals: those who the government was originally trying to help. What’s more, it seems those who stopped purchasing sodas switched to alternatives with just as many calories, such as fruit juices or energy drinks.

That would mean the tax was at best a source of revenue for the national government, and at worst, a fierce killer of local shops and commerce.

An economic survey of the effect of the tax found that more than 30,000 Mexican stores which sold sodas were forced to close in the first half of 2016.

In Washington State, campaigners were successful in passing a ban on local grocery taxes. In large measure, this ban will ensure localities cannot pass their own taxes on ordinary goods Americans purchase at the store: meats, beverages, produce, dairy, grains, and more.

As such, Washington residents should be both proud and relieved. They won’t be seeing their grocery bills climbing any time soon, and that’s because they voted with their wallets on Election Day.

Whether policymakers at the city level will see the harmful effects of passing such taxes, however, remains to be seen. If they listen to the leaders in Philadelphia and other jurisdictions, they will think twice.

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About Yaël Ossowski

Yaël Ossowski is a journalist, activist, and writer. He's currently deputy director at the Consumer Choice Center, and senior development officer for Students For Liberty. He was previously a national investigative reporter and chief Spanish translator at Watchdog.org, and worked at newspapers and television stations across the country. He received a Master’s Degree in Philosophy, Politics, Economics (PPE) at the CEVRO Institute in Prague. Born in Québec and raised in the southern United States, he currently lives in Vienna, Austria.

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Ending sugar protectionism will help boost small business and benefit consumers

This week in the nation’s capital, the House Agriculture Committee will decide the fate of various agricultural subsidies and food benefits for millions of Americans.

The bill, H.R. 2, known as the Farm Bill, includes provisions on crop insurance, dairy prices, wetland conservation, Supplemental Nutrition Assistance Program (SNAP) adjustments, and dozens of other rules and regulations on commodities.

Tucked within this massive bill is a continuation of the U.S. Sugar Program, a decades-old government program that effectively sets prices for sugar, guarantees cheap loans for domestic sugar producers, and keeps out foreign competitors. It’s sugar protectionism, through and through.

As I mentioned in the Washington Examiner some months ago, this program has the unintended consequence of raising the costs of sugar for various small businesses, and passing those costs on to consumers.

The consequence of that multi-decade arrangement, however, has been higher costs for consumers and domestic businesses that rely on sugar as a base ingredient for their products.

According to the American Enterprise Institute, users and consumers of sugar lose out to the tune of $2.4 billion-$4 billion a year. That directly hurts the thousands of small businesses that rely on sugar’s low prices.

Now that the Farm Bill is set to be voted on in the committee, legislators have a chance to alter this program that has proven to be a huge burden to small businesses and consumers.

Key to this will be the Foxx Amendment, proposed by U.S. Rep. Virginia Foxx from North Carolina. This amendment would shrink the U.S. Sugar Program from its current size to a more moderate version. It wouldn’t go so far as scrapping the program, but it would make necessary changes that would better benefit consumers and American businesses that rely on affordable sugar.

In an op-ed with Americans For Tax Reform President Grover Norquist, Foxx makes the case for reforming the U.S. Sugar Program and slimming down sugar protectionism once and for all.

But the sugar program costs some Americans more than higher grocery prices: it costs them their job. As the U.S. International Trade Administration found, the program kills three manufacturing jobs for every sugar-producing job that it protects.

Let’s look at a few painful examples. The Spangler Candy Company reports, “Today, we have about 150 people making candy for us in Mexico. In 2017, Spangler had 900 people apply for jobs at our Ohio factory. I would love to offer 250 of them a job as a candy cane maker, but our government insists that sugar processing jobs are more important than manufacturing jobs. They are picking winners and losers and our town has been the loser for many years now.”

The Atkinson Candy Company moved 80 percent of its peppermint-candy production to a factory in Guatemala that opened in 2010.

And the makers of President Reagan’s favorite candy, Jelly Belly, had to build its new 50,000-square-foot plant in Thailand thanks to the high sugar price driven by U.S. policy.

The evidence is overwhelming — this is an expensive and damaging special-interest giveaway and it must be stopped.

As Foxx and Norquist demonstrate, the current sugar program forces small, family-owned food companies to pay twice as much for sugar as the rest of the world. It restricts how much domestic sugar can be sold, and how much sugar can be imported from other countries.

That’s a huge blow to consumer choice, not to mention an indirect tax to small businesses that rely on sugar for their products.

According to the U.S. Census Bureau, the sugar program killed 123,000 jobs between 1997 and 2015. The U.S. Department of Commerce reports that for every sugar-processing job subsidized through artificially high U.S. sugar prices, three American manufacturing jobs are lost.

In response, Foxx introduced her own bill to tackle the program and modernize it. The Sugar Policy Modernization Act of 2017, introduced back in November, currently has 80 co-sponsors but remains stuck in the House Agriculture and Ways and Means Committees.

The Farm Bill will take precedence, and thus focus will now be on the Foxx Amendment to make the needed changes for America’s domestic sugar policy. If legislators want to help prop up American consumers and small businesses rather than Big Sugar, they would vote to reign in the sugar protectionism in the Sugar Program.

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About Yaël Ossowski

Yaël Ossowski is a journalist, activist, and writer. He's currently deputy director at the Consumer Choice Center, and senior development officer for Students For Liberty. He was previously a national investigative reporter and chief Spanish translator at Watchdog.org, and worked at newspapers and television stations across the country. He received a Master’s Degree in Philosophy, Politics, Economics (PPE) at the CEVRO Institute in Prague. Born in Québec and raised in the southern United States, he currently lives in Vienna, Austria.

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He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE).

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About Bill Wirtz

Bill Wirtz is policy analyst for the Consumer Choice Center, based in Brussels, Belgium.

Originally from Luxembourg, his articles have appeared across the world in English, French, German, and Luxembourgish.

He is Editor-in-Chief of Speak Freely, the blog of European Students for Liberty, a contributing editor for the Freedom Today Network and a regular contributor for the Foundation for Economic Education (FEE).

He blogs regularly on his website in four languages.