Eastern Passages

A tax challenge for Atlantic Canada

It’s springtime, and in the Atlantic region, governments’ thoughts turn to money. The federal budget comes down on Wednesday, and provincial budgets usually tag along pretty closely afterwards. In all of the Atlantic provinces, except Nova Scotia, dismal fiscal pictures will mean new revenues are a godsend. (Nova Scotia can use the revenues, too, but that province is heading for an election call, which means its budget this year will likely have as much to do with real life as the Tooth Fairy does to dentistry.)

We already tax a whole bunch of our bad habits: alcohol and cigarettes are favourites of governments for raising cash, and you can be absolutely sure that when the Trudeau government brings down new legislation legalizing the sale of marijuana (expected this spring), both the federal and provincial governments will be quite literally rubbing their hands together at the tax benefits they hope will accrue to their respective coffers.

(Not that anyone loves taxes, nor do people always think they are fairly applied. I’ve had smokers tell me that, at current tax levels, they bear a disproportionate amount of the health-care system on their backs, because they die faster and more effectively than nonsmokers, thereby saving the health-care system and the pension system money that can be spent on longer-lived others. I’m not sure that’s even remotely true, but it is a comfortable justification.)

But while we’re talking about the usual revenues on unhealthy habits, I wonder if any of the Atlantic provinces will be brave enough to look at soft drinks — and even more than that, fast food. In several parts of North America, governments are trying out higher tax rates specifically on soft drinks, with the twin goal of raising more money, and lowering obesity rates and consumption-based diseases like Type 2 diabetes. (Studies so far suggest that the experiment is successful at raising cash, but less successful at actually addressing obesity.) Now, there are issues: in Philadelphia, Pa., soft drink bottlers are saying drops in consumption are causing drops in revenue and are causing layoffs. At the same time, in January of this year, the soda tax brought in US$5.7 million – the city’s expecting US$91 million in 2017, money that is being spent on community school programs and library and park infrastructure. (And, in the process, has created 240 full-time positions.)

In Berkeley, Calif., there has been a suggestion that the drop in soda sales could be as much 21 per cent, though more accurate math from Mexico’s sugar tax indicated a 5.5 per cent drop in drink sales in the first year, followed by a 9.7 per cent drop in the second year. The largest consumption drops measured in Mexico were among people in the lowest income brackets. If taxation was an honest and level playing field, you can be certain that soft drinks and other fast foods would be a potential tax target in every provincial budgetary playbook — probably the biggest problem anyone’s looking at is voter pushback. Politicians probably know “an apple a day keeps the doctor away.” They probably fear that a taxed soda a day will have the same effect on voters.

But should such taxes go ahead, though, the provinces that take the leap should do more with the money than simply pump it straight into general revenues.

They might want to look at rewards as well as taxes, at least for some of the cash.

Instead of just a cash grab, maybe a carrot-and-stick approach to eating, well, more carrots. It might be better received if some of the money that comes in from taxes on unhealthy eating could be applied to helping families deal with the muchhigher costs of buying healthy foods.

Either way, it’s really only a matter of time.

Politicians probably know “an apple a day keeps the doctor away.” They probably fear that a taxed soda a day will have the same effect on voters.