“What can we tax next?” is the repeated refrain from spend-happy state and local politicians. Trendy sin taxes on products “we don’t like” have been in vogue for decades now, with taxes on alcohol and tobacco expanding to sodas, blueberries, and yes, playing cards. At best, these taxes disproportionately punish the working poor, whose consumption spending is a higher share of their income. At worst, excise taxes fuel black market activities and pad the pockets of criminal syndicates. These unintended consequences of “fun fees,” however, have not deterred public officials always on the lookout for a fast buck.
The “junk food tax” has been implemented in several countries over the past decade. Proponents claim that, in addition to being administratively feasible, taxes on fatty and sugary snacks and drinks can curb obesity. But a closer look at these claims shows that supporting studies are shoddy and actually undercut the argument that junk food taxes work. Instead of punishing low-income shoppers for their purchases, taxpayers and consumers should punish politicians for reckless spending that bleeds coffers dry.
As with many in-vogue policy ideas, the case for the “junk food tax” was born abroad. Researchers looked to the cases of Hungary and Mexico, which implemented taxes on snacks and beverages with high fat, sodium, and sugar content. Faced with low life expectancies, high per-capita salt consumption, and a majority-overweight population, officials in Hungary implemented a targeted tax on unhealthy eats in 2011. Products in certain categories deemed to have excessive levels of salt and sugar were slapped with a 4 percent tax. The stated two-fold aim was to encourage healthier choices and raise money for public health. Mexico put a simpler program in place in 2014, charging an 8 percent tax on packaged products with at least 275 calories per 100 grams, which included some healthy foods.
As several years have passed since these reforms, researchers have attempted to measure the effects on waistlines and reported habit changes. In summarizing the results of the Hungarian experience, the World Health Organization concluded in a research brief that people bought fewer unhealthy products because their price was higher. This, however, is simply not consistent with the evidence. In fact, statistics from the Hungarian government show that unhealthy food consumption actually increased in the couple of years since the introduction of the tax.
Researcher Anikó Bíró at the University of Edinburgh dove deeper using regression analysis, and found evidence that expenditures of untaxed sweets went up in the aftermath of the tax. In other words, customers are simply removing taxed products from their baskets and adding untaxed products that aren’t necessarily any healthier. But any sort of analysis trying to isolate the effect of one policy on bottom-line results inevitably runs into trouble. Even if researchers could reasonably claim to have evidence of changing behavior after 2011, they would also need to account for the drastic price increase of imported sugar around that time.
In the case of Mexico, concurrent policy changes put strict limits on junk food advertisements on television. The main examination of Mexico’s efforts fails to take this into account, and makes no attempt to measure any sort of substitution away from targeted, packaged foods. Could Mexicans have responded to the 2014 tax by frequenting stands on the streets more often? Given Mexico’s reliance on mom-and-pop food vendors, this possibility needs to be accounted for in the research.
Public health researchers cannot simply assume that sin taxes work as advertised. There are too many complicating factors with accompanying unintended consequences. According to some research, taxes on unhealthy food may lead to decreases in exercise, as individuals and families are nudged to spend more time preparing food. The world is often a more complicated place than we believe, where even the simplest top-down schemes are liable to go awry. Instead of chasing after half-baked schemes to raise revenue, elected officials should put the taper on rampant wasteful spending.
Cutting down on expensive website redesigns and streetcar ventures, for instance, can free up funds for essential public services such as emergency response and road repairs. Instead of asking what they can tax next, politicians should work with taxpayers to build a simpler, less burdensome government, and cut the fat from wasteful government expenditures.
Ross Marchand is the director of policy for the Taxpayers Protection Alliance.
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