The immorality of ‘sin taxes’

First Do No Harm

by Rob Lyons 

The apparent benefits of ‘sin taxes’ are greatly overstated for a variety of reasons. But the biggest problem of all is what they say about the relationship between the state and the citizen today.

Taxes on alcohol, smoking and ‘junk’ food are proposed ostensibly to reduce the incidence of a variety of diseases. But these diseases overwhelmingly affect older people. So we are being asked to pay more money or forego certain pleasures in exchange for a few extra weeks or months of life, on average. Alternatively, these taxes target conditions, like obesity, whose negative effects have been greatly exaggerated.

Such taxes do not hit the pockets of everyone in society equally; they are regressive, in that they hit poorer people disproportionately for a variety of reasons. So it seems that governments have come to save the poor by making them poorer.

It is claimed by some penny-pinching campaigners and medics that sin taxes save the state money by reducing ill health. It’s not true. To the marginal extent that such taxes do change behaviour in the desired fashion, the result will be people living longer and incurring greater costs in pensions and other old-age benefits, social care and healthcare. I’m definitely in favour of people living longer, but the argument that sin taxes are required to stop the National Health Service from being bankrupted is just wrong. If we were to take such a mean-minded approach to its logical conclusion, we should be congratulating smokers, for on average dying earlier than non-smokers, rather than trying to restrict smoking.

While taxes on tobacco and alcohol have been around for a long time, the idea that we should start modifying people’s behaviour in relation to food only really become fashionable recently. So when the Academy of Medical Royal Colleges (AoMRC) came out with a 10-point plan on reducing obesity a couple of weeks ago, the headline-grabber was the suggestion of a 20 per cent tax on sugary drinks.

While the UK has been musing on such ideas, other countries in Europe have been implementing them. In Denmark in 2011, a tax was placed on foods containing more than 2.3 per cent saturated fat. The Hungarian government has imposed a range of taxes on foods with high fat, salt or sugar content. But the Danish tax was scrapped a year later and, if an article in Saturday’sNew York Times is to be believed, most Hungarians think the fat taxes have done more to impoverish them than to reduce the consumption of apparently unhealthy foods.

Food taxes like these are a good case study in the problems and limitations of sin taxes in general.

Firstly, while any price increase will have some effect on sales of particular foods, that doesn’t mean that people eat more healthily. They do try to avoid the tax to some extent, but that doesn’t mean they will simply swap fizzy drinks for bottled water or crisps for apples. It means they will find alternatives. That might mean choosing a cheaper brand - which is easy with fizzy drinks because the supermarket own-brands are usually less than half the price of the big name brands. Or people might make an effort to buy in bulk to save money, stocking up at the supermarket rather than buying cans one at a time when they feel like one. Or they’ll cross the border to another tax jurisdiction if it means lower tax rates. That last flaw was one of the problems with the Danish fat tax - people just nipped across to Germany to buy their cheese and sausages in bulk instead of shopping at home. One of the main beneficiaries of the Danish fat tax, it would seem, were German supermarkets.

Secondly, there are perverse effects. That could mean people continuing to consume the cheap naughty-but-nice foods and saving money by cutting back on fresh vegetables - precisely the opposite response to the one intended. Or it could be that the taxes hit unintended foods. So, for example, how do you design a sugary drinks tax that hits Coca-Cola but not fruit juice, when fruit juice contains more sugar than Coke? How do you design a fat tax that hits processed meat, for example, but not top-quality cheese?

Thirdly, food taxes assume that we understand the medical science clearly, so we can target just a specific ingredient or component of food and achieve significant health benefits. So the Danish tax was targeted at saturated fat. But in recent years there has been more and more evidence to suggest that saturated fat is not the cause of heart disease at all and has been falsely maligned. We’ve been told for years to avoid fat, so people have switched to low-fat foods that are often higher in sugar than the full-fat alternative. And what’s dietary enemy number one today? Sugar. Unless you are sure on the science, don’t interfere. Given the medical profession’s obsession with interfering and micromanaging our lives, it would be good if they could remember the first thing they learned at medical school: First, do no harm.

But the biggest problem with sin taxes is what they do to personal freedom. I would be opposed to sin taxes even if you could design one that only reduced consumption of the specific thing you were aiming for, was not regressive, and which had clear health benefits. That’s because I don’t believe it is the place of governments to distort the environment in which I live in order to persuade me to make the right choices rather than choices deemed by somebody else to be the wrong ones. The idea of a National Health Service should be to provide affordable access to healthcare when I’m sick, not to tell me how to live when I’m healthy. Having given up on the idea of nationalising industry, it seems the state has decided to nationalise our bodies instead.