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Mexico's Soda Tax Isn't Going to Reduce Obesity

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Justin Sullivan via Getty Images
Justin Sullivan via Getty Images

Is the Mexican 10 per cent tax on sugary drinks working? You'd think so if the only news you followed are the preliminary findings of a study by Mexico's Institute of Public Health and the Carolina Population Center at University of North Carolina. No surprise here since both organizations are strong advocates for more taxes on soda drinks.

So far we've only seen some press releases to go on while the full results will have to wait until published in Health Affairs. Their study finds that sales of soda across the country were down 6 per cent for 2014, the first full year of the tax. On the basis of that reduction, the Institute for Public Health concludes the tax is working to reduce consumption across the country and in all socioeconomic sectors. And those in the lower socioeconomic sector reduced their consumption of sugary drinks by nine percent and drank four percent more bottled water.

The study also claims that the tax also had the benefit of raising awareness of the link between rising obesity and consumption of soda. And all this was achieved "despite the aggressive tactics use (sic) by the beverage industry."

Based on that evidence it's no surprise that the Institute of Public Health now calls for a 20 per cent tax justified by its preliminary findings of lower soda consumption. If 10 per cent is good, 20 per cent is better. Then again, if the evidence were reversed, soft drink tax advocates would still be calling for higher taxes. Classic case of heads I win, tail you lose.

New Data Tells a Different Story

A recent study by RIWI, a global survey and risk management company, found different results.

RIWI technology is different in many ways from polling companies since it does not rely on self-selected opinionated people on panels who frequently take surveys for cash or rewards. The RIWI population parameter is therefore broad and consists of random non-incentivized respondents who rarely answer polls.

In a national survey of 3,976 respondents only 44 per cent even knew about the soda tax implemented in 2014. That might explain why only 24 per cent of lower-income earners said they were substituting more milk or water for soda as a result of the tax, and why only 31 per cent of lower-income earners said they drank less soda as a result of the tax that contradicts the much higher finding in the National Health Alliance poll.

The RIWI data also found that 67 per cent of higher income respondents hadn't changed their drinking habits to reduce their soda pop consumption. And 58 per cent of lower-income earners also hadn't changed their drinking habits in this manner because of the tax.

Professor Kelly Brownell, one of the most prominent and vocal advocates for higher taxes, has always argued that taxes are popular among consumers when it comes to curbing soft drinks. Not so in Mexico. Again RIWI found that even though a majority (64 per cent) of those responding agreed that soda contributes to obesity, over 60 per cent of the respondents didn't support fighting obesity through higher taxes. And that finding applies to both high and low income groups.

It seems that the majority of the Mexican population are in agreement with what economists have been saying all along. In a recent article in the Journal of Health Economics, economist John Cawley concludes there is no single dominant cause of obesity and "there is no magic bullet that will reduce obesity." Try telling that to the soda tax advocates.

Soda tax advocates also had high hopes that the new tax in Berkeley, Calif. was the start of a nation-wide trend. Now we have a study from the National Bureau of Economic Research that will disappoint those who strongly support the Berkeley initiative. The NBER found that only about 50 per cent of the tax increase on surgery drinks is actually passed along to consumers. For whatever reason, consumers aren't seeing much of a change in the price of their soda. One explanation is that some retailers are absorbing the tax.

Now we have two reasons to be skeptical about Mexico's soda tax effectiveness: very little incentive to substitute to other drinks and not much pass through to consumers. Based on that we can expect the Mexican tax to be a bust both on the consumer's pocketbook and health.

Speaking of health, the NHA makes no mention of improvements in health or lowering diabetes rates. That's just assumed with no evidence. And without that, the whole exercise of taxing soft drinks is essentially futile.

Patrick Luciani is the co-author of XXL: Obesity and the Limits of Shame published by the University of Toronto Press, 2011. The book was also short-listed for the prestigious Donner Prize in 2013.

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