Home Politics Philly’s Sugar Tax May Travel Down Under

Philly’s Sugar Tax May Travel Down Under

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You want to lose weight? The age-old advice applies: diet and exercise. But governments around the world think they have a better idea. They propose to do what governments do best: tax the heck out of you.

The cost of the sugar tax in Philly is already being passed on to the consumer.

Sugar Tax

A recent report from the left-wing Australian think tank the Grattan Institute urged Australia to impose an excise tax of 40 cents per 100 grams of sugar on all non-alcoholic, water-based drinks with added sugar. The rationale behind the tax is to combat the country’s rising obesity rate, with the Institute claiming the tax would lift the price of a two-liter soft drink by around 80 cents to raise about $500 million a year in extra revenue.

The recommendation has – unsurprisingly – gained support from the Greens, the Public Health Association of Australia and even UK celebrity chef Jamie Oliver. But the federal government should look to the USA with serious caution before considering such a proposal.

Look at the recent sugar tax in Philadelphia, the largest city in America to introduce a specific tax for soda and sugary beverages (something previously confined to progressive communes like Berkeley, California). Locals in Philadelphia are reeling after prices have almost doubled. City officials were adamant the tax was intended to hit distributors of sugary drinks, but basic economics has proved victorious once again: the cost of the tax is being passed on to the consumer.

This Isn’t Going to Work

With every new governmental policy, advocates should look to its underlying purpose before assessing whether it will actually be effective. If the true purpose of a sugar tax is to reduce obesity, the purported benefits laid down by the Grattan Institute should be questioned with reference to similar taxes. The punishing tobacco tax, for instance, will never work to stop smoking. The nicotine in tobacco is an addictive product that could be charged at $100 per pack without every smoker quitting.

Soft drink companies will simply switch to artificial sweeteners to get around the tax.

The effectiveness of a sugar tax halting the crusade on soft drinks is unlikely to work, either. If people wish to drink soft drinks they will do so, and soft drink companies will simply switch to artificial sweeteners – already seen with products like Coke Zero – to get around the cost.

As the Spectator reported last year, Denmark introduced a tax on sweetened soft drinks in the 1930s which by 2013 was being levied at a rate of $0.23 a liter and brought in $63m a year. However, the Danish government also estimated it was losing $41.3m in value-added tax from illegal soft drink sales.

In 2011, the government also introduced a $2.30 fat tax on items with more than 2.3% saturated fat and planned a more general sugar tax. However, the fat tax was abandoned after 15 months when surveys suggested only 7% of Danes had reduced their fat intake. The tax was blamed for 1,300 job losses as Danish shoppers crossed to Germany or Sweden to do their shopping.

A tax will do absolutely nothing to change the underlying behaviors that lead people to seek sugar in their diet. It appears useless that yogurt, cereal, confections, or chocolate won’t be affected by the tax, despite often containing higher sugar contents than soft drinks. As Senator David Leyonhjelm said, “Before you know it there would be calls for taxes on salt, chocolate, and anything else some prude fears we might enjoy.”

If we really want to tackle obesity through parental policies, perhaps taxing all processed foods and subsidizing those who supply natural foods would be a more effective solution.  

What About the Poor?

What bureaucrats forget is the fact that consumption taxes always hit society’s poorest the hardest. The only people happy with the new tax in Philadelphia are, predictably, the city officials who will have an estimated $90 million in new annual revenue to spend. But what political organizations like the Greens seem to ignore is that, despite posing as champions for the underprivileged, a tax on cheap sugary drinks will only hurt them more.

Such taxes will only hurt the underprivileged more.

Like the tobacco tax, which penalizes our most disadvantaged who are more likely to take up and continue smoking, soft drinks work the same way. In England, the poorest 10% of households already pay more than 20% of their gross incomes on duties and value-added taxes – more than double the average household. A sugar tax would only add to that burden.

Governments need to remind themselves it is not their business to control what people choose to consume. Taxing something you don’t like is lazy policy. If a person chooses to drink ten liters of soda every day they should be allowed to, without the permission of public officials, providing they are willing to accept the health consequences of such an unhealthy diet.

I have a dream. One day, people will take responsibility for their own actions, and stop blaming everything other than their eating habits and laziness for their fat and bad health.

Diet and exercise are more effective and more moral than taxes.

James Ledger

James Ledger

James is an Australian intern working with FEE through the winter. Back home he’s affiliated with the Mannkal Economic Education Foundation, a free-market think tank which sponsors students each year to work with like-minded organisations to pursue ideas of liberty, personal responsiblity and small government. He hopes to gain the experience he needs from FEE to pursue his career in fostering libertarian public policy throughout Australia.

This article was originally published on FEE.org. Read the original article.

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