Will taxing sugary soft drinks, alcohol and tobacco help the poor?

A major study examining ways of stemming the rising rates of non-communicable diseases (NCDs) worldwide has concluded that taxes on unhealthy products such as sugary soft drinks, alcohol and tobacco would produce major health gains for the poorest members of society. This is contrary to the common argument that these "lifestyle taxes" would unfairly harm low-income households.

Composed of five separate papers, the special issue of The Lancet journal set out to investigate economic strategies to battle rising global rates of NCDs including stroke, heart disease, diabetes, chronic respiratory disease and cancer. The study was published ahead of the upcoming sugary drink tax set to be instituted in the United Kingdom this month.

"Taxes on unhealthy products can produce major health gains, and the evidence shows these can be implemented fairly, without disproportionately harming the poorest in society," says Rachel Nugent, Chair of The Lancet Taskforce on NCDs and economics.

The study's conclusions appear to disprove a commonly offered argument claiming that taxing unhealthy products will disproportionately harm the poor. The argument is that taxing tobacco, alcohol, or sugary beverages will unfairly hit low-income households and ultimately not change the behavior of individuals.

Examining data from 13 countries, evidence was found to suggest that high-income households consume much more alcohol, soft drinks and snacks, compared to low-income households. This means that taxes on these products would generate significantly more revenue from high-income segments of society.

The data also suggested that rising the prices of products does in fact change the behavior of lower-income households. As a case study, a sugary soft-drink tax in Mexico was cited in depth. In 2014, the country instituted a 10 percent tax on sugar-sweetened beverages. After one year, the results showed a 12 percent overall reduction in purchases of taxed beverages, with a 17 percent decrease in lower-income households.

Looking at tobacco, one of the studies modeled the consequences of a 50 percent increase in the price of cigarettes, using a country like Lebanon that has a high-tobacco consumption rate as the example. The model estimated that twice as many poorer smokers would quit because of the price rise and a third of the tax generated would come from the richest quintile.

"The evidence suggests that concerns about higher taxes on tobacco, alcohol, and soft drinks harming the poor are overstated," says Nugent. "Some degree of taxation on tobacco is common in many countries, and while we are starting to see progress on alcohol taxes, there is much more governments should be doing – in both high and low income countries – to consider the careful introduction of taxes on other unhealthy products like soft drinks and snacks."

Despite proposals of sugar or soft drink taxes in the United States often being met with great debate, some cities have been experimenting with small scale tests, and early indications are offering successful results. Sweetened soft drink taxes in both Berkeley, California and Philadelphia, Pennsylvania have shown consumption rates decrease, especially in lower-income neighborhoods.

Critics of these kinds of soft drink taxes point out they are often arbitrary, taxing only some sugar-sweetened beverages but not other equally caloric or sweet drinks, such as fruit juices or flavored milks. Some studies have indeed found that people may switch to other sweetened beverages when soft drink taxes are introduced. The American Public Health Association has responded to these studies by suggesting there would be overall health benefits if a person did switch from a sugar-sweetened soft drink, to milk or fruit juice.

The new research was published in the journal The Lancet.

Source: George Institute for Global Health