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The Case Against Taxing Soda

Posted: 11/15/2012 12:35 am

Can we tax ourselves to better health? Many think the answer is yes. New York Mayor Michael Bloomberg champions a tax on soda; two California towns recently put the idea up for referenda; the Ontario Medical Association favours taxing sugary and fatty foods. (And, hey, the news from Europe: French lawmakers consider a Nutella tax.)

On this, we can all agree: North Americans are becoming very unhealthy. Obesity rates on both sides of the 49th parallel have soared, with one in four Canadians now qualifying as obese (American stats are even worse).

For much of the last century, medicine was all about fighting diseases like polio and smallpox. In this century, lifestyle choices and chronic illnesses have become major medical problems -- and cost drivers. Rising obesity rates mean an epidemic of diabetes, cardiac disease, and slew of other avoidable problems, and their associated costs. "Fat," as the Financial Times quipped, "is a financial issue."

It's not surprising that so many champion ideas to trim our waists. The biggest target? Soda. Many North American experts now claim that soda is the new tobacco -- indeed, Google those terms and you get more than 7 million hits. For them, Coke is the new Camel. Yale's Kelly Brownell claims that "[soda companies] are using many of the same tactics that tobacco companies used." Heavy rhetoric? Dr. Thomas Farley recently made a similar point and he's New York City's health commissioner.

And thus, people on both sides of the 49th parallel favour a war on soda. Writes Western economics professor Mike Moffatt: "soft drinks provide little to no nutrition, so it is easier to implement a specific tax on them than on all junk food. A tax on pop would more closely resemble the sin taxes on alcohol and tobacco." But as I point out in a paper released today by the Montreal Economic Institute, a soda tax would be bad idea.

Let me take a step back and note the basic problem in fighting obesity like we fought tobacco.

1. The times are different.

When the Surgeon General issued his landmark report in 1964, millions of North Americans made no connection between tobacco and cancer. We live in the age of Google -- people know far more about their health. I've never met a patient who thought copious amounts of soda led to more healthful living.

2. The product is different.

Tobacco is never good for you. There is no right amount of tobacco; it does nothing but increase the risk of cancer and other diseases. Soda -- like eating cake or a slice of pizza at lunch -- can be part of a balanced, healthy diet.

And, thus,

3. The needed solution is different.

Taxes on tobacco helped push millions of people to butt out; faced with a heavy financial penalty, they had no alternative drug. Diet is vastly more complex -- and it's not clear that a tax on soda would even be that helpful. People, after all, may avoid soda, but consume something in its place (this is the concept of caloric substitution).

Fanciful argument? Actually, researchers at Cornell University did a real-world experiment with taxation and soda: half the households in an upstate New York town faced a 10 per cent tax on soda consumption and the other half didn't. Interestingly the tax discouraged consumption only for the first month and then people went back to their old ways. And, alas, the law of unintended consequences: beer consumption increased for those facing higher soda taxes. The paper was published with the title: "From Coke to Coors."

Others have reached similar conclusions. One study in the Journal of Health Economics found that substitution effects are so complex that poorly targeted food and beverage taxes "could actually increase weight."

Here is an irony of modern times: medicine has never been better but we are increasingly less healthy. We need to take obesity seriously. But in our effort to better our health, we can't be seduced into simple solutions. A tax on sugary beverages sounds compelling. It's also too simplistic to make a difference.

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  • Wendy's Baconator Double

    We're sorry to tell you this, Mr. Mayor, but the cheeseburger called <a href="http://www.thedailybeast.com/galleries/2010/03/24/the-40-deadliest-fast-food-meals.html" target="_hplink">"Deadliest Fast Food Meal"</a> by the Daily Beast, the Baconator Double, packs 1,330 calories in one serving.

  • IHOP's Chicken And Spinach Salad

    Mr. Bloomberg, we apologize for the shock that burger must have caused you. Allow us to soften the blow with a salad. <a href="http://www.dailymail.co.uk/femail/article-2111042/Not-healthy-option--The-IHOP-chicken-spinach-salad-calorie-equivalent-THREE-Big-Macs.html" target="_hplink">IHOP's 1600 calorie Chicken and Spinach Salad</a>. For the record, that calorie count is higher than a burger on their menu with an added <strong>bacon patty</strong>.

  • T.G.I.Friday's Loaded Potato Skins

    We know how you feel, sir. Up is down, down is up, salad is terrible for you... perhaps potato skins have become good for you? Maybe not. <a href="http://www.tgifridays.com/greatfood#appetizers" target="_hplink">T.G.I.Friday's Loaded Potato Skins</a> have 2030 calories and 131g of fat, which, it should be noted, is significantly more than the Jack Daniel's Sampler Platter -- which is a plate of meat, basted with Jack Daniel's and sugar.

  • KFC Double Down

    In case you somehow missed it, Mr. Bloomberg, we'd like to turn your attention to the KFC Double Down. They use fried chicken instead of buns for this sandwich, sir.

  • World's Meatiest Sandwich

    <a href="http://www.geekologie.com/2012/05/28-lb-sandwich-is-worlds-meatiest-most-k.php" target="_hplink">This monstrosity was created</a> to commorate the UK launch of <em>Man vs. Food</em>. Sir, you're probably thinking to yourself, "Who wants to eat a 28 pound sandwich, anyway?" We're not sure, Bloomie, but you'll probably want to ban it.

  • Burger King Triple Whopper With Cheese

    Mr. Mayor, we see your gears turning: just like the proposed ban on large sodas, you're envisioning limiting Burger King customers to only two patties per burger. This<a href="http://www.youtube.com/watch?v=X5vjQQXauD0" target="_hplink"> Japanese commercial for the product</a> may have swayed us your way: you probably shouldn't order anything you have to un-hinge your jaw to eat.

  • Bacon Explosion

    Where will the line be drawn, Mr. Mayor? Will you follow your nose to the doors of those citizens who make themselves a <a href="http://www.nytimes.com/2009/01/28/dining/28bacon.html" target="_hplink">Bacon Explosion</a> and confiscate the contraband? <em>Bacon explosion picture by Flickr user <a href="http://www.flickr.com/photos/beckmann/3362040723/sizes/z/in/photostream/" target="_hplink">Elin B.</a></em>

  • Chili's Shiner Bock Baby Back Ribs

    Michael (can we call you Michael?), by now, we all know <a href="http://www.nytimes.com/2009/09/23/dining/23bloom.html?pagewanted=all" target="_hplink">how much you like salt</a>. But <a href="http://www.chilis.com/" target="_hplink">Chili's Shiner Bock Ribs</a> may be too much even for you: they're packing a whopping 2310 calories, 124g of fat and <strong>6340mg of sodium</strong> in one portion. Please put down the salt-shaker, sir.

  • Denny's Grand Slamwich

    Because we know how focused on health you are, Mr. Mayor, you are likely very focused on starting your day off with a substantial breakfast. Please hang onto your Mayoral hat, because <a href="http://dennys.com/" target="_hplink">Denny's Grand Slamwich</a> is packing 1520 calories and 101 grams of fat. Although there are currently no Denny's locations in New York City, we thought you might want to disapprove anyway. Today NYC, tomorrow the world, am I right? (You remember their <a href="http://www.huffingtonpost.com/2011/09/01/dennys-mac-n-cheese-patty-melt_n_945390.html" target="_hplink">Mac N' Cheese Big Daddy Patty Melt</a>, don't you?)

  • Burger King Bacon Sundae

    Still hungry for dessert? Well sir, Burger King <a href="http://www.huffingtonpost.com/2012/06/12/burger-king-bacon-sundae_n_1590522.html?utm_hp_ref=food" target="_hplink">will be giving their Bacon Sundae a wider release this summer</a>, which means more soft-serve, fudge, caramel and bacon will be available to the public.

  • Cold Stone Creamery's Chocolate Malt

    Here's one you might want to pick up your ban-writing pen for, Mr. Mayor: just one of <a href="http://www.coldstonecreamery.com/" target="_hplink">Cold Stone Creamery's</a> "Gotta Have It"-sized Chocolate Malts contains 1520 calories and 85g of fat. A healthier option might be to just eat a <a href="http://www.fatsecret.com/calories-nutrition/usda/butter?portionid=29481&portionamount=1.000" target="_hplink">stick of butter</a> on its own.

 
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