A sugar tax probably would work and indeed has worked

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Don’t argue about the sugar tax like it’s never been tried before.

I have seen a number of articles about the sugar tax that argue or even assume that it will fail to reduce consumption of sugary drinks. What these arguments tend to overlook is that these kinds of taxes have been tried in other jurisdictions. The Economist reported last year that:

Some worry that retailers may absorb the tax rather than passing it on to customers, thereby obscuring the signal governments are trying to send; others, that higher prices will not lead to a change in behaviour, but will simply sap the incomes of the poor in particular.

A working paper by economists at the French central bank, the Sorbonne and the University of Paris-Est Créteil found that retailers passed on nearly all of the French tax. A working paper on the Mexican tax by Raymundo Miguel Campos-Vázquez and Eduardo Medina-Cortina of the Colegio de México, a university, finds that retailers there went even further, raising prices for soft drinks by 30% more than the real value of the tax.

Higher prices, in turn, do seem to have crimped demand for fizzy drinks. FEMSA, Coca-Cola’s Mexican bottler, blamed declining sales in 2014 on the price jump that followed the introduction of the tax. A monthly manufacturing survey found that overall sales of fizzy drinks fell by 1.9% in 2014, having increased by an average of 3.2% a year over the previous three years (see chart). Another study, based on household surveys rather than industry data, shows an even stronger effect: it found that consumption of sugary drinks fell by 6% relative to pre-tax trends over the tax’s first year. Some data suggest that Mexicans switched to healthier alternatives. The manufacturing survey shows that sales of bottled water jumped by 5.2% in 2014.

It is also worth noting that taxation appears to reduce alcohol and tobacco use. Of course these precedents imply rather than prove that a sugar tax will reduce demand but you can’t just ignore them if you don’t like the policy.

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4 thoughts on “A sugar tax probably would work and indeed has worked

  1. What I object to is why I, who am not obese, and whose parents taught me to eat and drink properly, should be punished by having to pay more for my coca-Cola just because some idiots have weak wills and no self-control.

    That hardly seems just.

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