It didn’t produce any positive results in the United States, but let’s give it a whirl across the pond, shall we, mates? Britain is about to do what Michael Bloomberg could only dream of in New York City and attempt to save its citizens from the sins of obesity and sloth by putting an incremental tax on soda and other sugary drinks. What could possibly go wrong? (Washington Post)
Britain is about to find out that its “sugar tax” isn’t as sweet a deal as it sounds.
Last week, Chancellor of the Exchequer George Osborne announced that Britain will soon join a handful of places around the world in imposing a special tax on soda and other sugary beverages…
And why not cheer? The tax certainly sounds like a bargain. It will raise the price of most sugar-sweetened beverages by a modest amount — 18 or 24 pence (about 26 or 34 cents) per liter, depending on sugar content — and, its backers promise, painlessly melt inches off the citizenry’s waistlines.
Speaking of the aforementioned Mr. Bloomberg, he was ready to put on his dancing shoes over this news.
.@George_Osborne's announcement today to tax sugary drinks puts the UK at the forefront of the global fight to reduce obesity & diabetes.
— Mike Bloomberg (@MikeBloomberg) March 16, 2016
As the Post’s Catherine Rampell points out, the celebrations may be a bit premature. In order for such a scheme to work out in terms of actually improving people’s health, a number of assumptions are required which have proven less than sound in the United States. Her first point is rather dubious, saying that it’s unclear if the price increase would be passed on to the consumer. Actually, the soda market is pretty competitive and they run on a fairly tightly controlled profit margin as it is. As long as the tax applies to all of the competitors they will happily pass that on to their customers.
But her other objections are well supported. First of all, jacking up the price of a two liter bottle of soda by thirty or even fifty cents isn’t going to noticeably cut down on consumption. (Or at least it didn’t over here.) You’re just going to make people more angry and put a small additional strain on the budgets of some of them. And that leads us to the second objection which is pretty much carved into stone. This is not the sort of tax which affects the wealthy or even the moderately well off. You’re going to be hitting the poorest citizens the hardest, and they already tend to be the biggest consumers of sweet drinks and less healthy food options.
Even though it’s being disguised as a health improvement initiative, this is just another sin tax under a different name. And sin taxes don’t work. We’ve seen it with tobacco and alcohol and most other low end “luxury” items. Demand remains the same and the profits for the government tend to be offset by increased incentives for smuggling if the price goes up too far. The Brits had best not get their hopes up too much over this plan. We’ve already tried it and the results speak for themselves.