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Sugar Tax

01 May 2012

Tax has traditionally been used as a way to discourage consumption (or on occasion to wickedly extort the good gentlefolk of their hard-earned possessions for the benefit of the self-serving overlords). Examples of this can be found in the tax on tobacco or Australia’s carbon tax (or in the evil Prince John of Robin Hood fame). The latest cab off the rank to be floated as warranting a tax to discourage consumption is sugar and the case is convincing.

Researchers at the Columbia University Medical Centre and the University of California have done extensive analysis to see what effect a tax on sugar would have. The figures are reflective of the American context but they have lessons for the wider world.

The researchers calculated that if sugar were taxed at the rate of a penny-per-ounce tax and if this tax were imposed on sugar-sweetened beverages only it would result in fifteen per cent reduction in consumption and reduce the prevalence of obesity, diabetes, and cardiovascular disease.

The researchers estimated that over a ten year period the penny-per-ounce tax could reduce new cases of diabetes by 2.6 per cent and avoid as many as 95,000 coronary heart events, 8000 strokes, and 26,000 premature deaths. They estimate that there would be 865,000 fewer obese people as a result of the tax. Most of this would arise from people switching to diet drinks and more nutritious low kilojoule beverages.

These health benefits represent savings of more than seventeen billion dollars (US) over a decade in medical costs avoided for adults aged 25, in addition to generating approximately thirteen billion dollars in annual tax revenue. So the sugar tax could save the US economy billions and billions of dollars every year.

So the sugar tax could benefit health for many and save the economy a lot of money at times when money is desperately needed by many economies still struggling with the flow-ons from the GFC, and possibly GFC MK-II.

One argument against a sugar tax is that it might disproportionately hit lower income people who tend to favour sugary drinks like soft drink. The researchers however, pointed out that the evidence is mixed regarding whether low-income consumers are more price-sensitive when it comes to these beverages. In addition, low-income people and racial and ethnic minorities bear a greater burden of obesity, cardiovascular disease, and diabetes, and these groups stand to benefit the most from such a tax in terms of their health and savings.

It would be a brave government that would take on the vested interests and the perceived hit at daily consumption habits by addressing a sugar tax. One can’t help but think though, that it might be a government worth voting for.