Pop tax won’t help poor or Canada’s health

Beverage regulations limit consumer choice and fail to meet their stated mission

Jamie Oliver recently penned an op-ed in support of a Canadian soft drink tax. What the celebrity chef failed to note was that such a tax would have horrendous effects on the poor.

Oliver writes in The Globe and Mail that, “the conversation about protecting Canadian children isn’t about taking the fun out of food, or stopping brands from doing business. It’s simply about making sure everyone knows the truth and has a decent choice about what they eat.”

The chef is right when he advocates a conversation about Canadian children’s health. However, he is misguided in his support for a soft drink tax. Such beverage regulations not only limit consumer choice, but fail to meet their stated mission, all the while disproportionately impacting the poor, and stifling job growth.

Everyone can agree that children need healthy meals. Expanding government oversight and establishing additional tax revenue streams under the guise of public health, however, is a misguided approach. What such paternalists fail to address are the unhealthy consequences of soft drink taxes.

Studies show the selective food and non-alcoholic beverage taxes (SFBT), or in this case the Canadian soft drink tax as Oliver supports, are passed onto consumers and not absorbed by producers and retailers.

In other words, businesses don’t eat the costs when SFBTs are enacted. Instead, consumers pay more for the products. That leaves lower-income families spending more of their hard-earned money for those taxed products. Health advocates will tell you that this helps curb caloric intake and fund health initiatives, but that hasn’t proven a successful model elsewhere.

When Mexico enacted SFBTs, the average caloric intake per person only fell by 6.1 kilocalories per day. Although sales dropped by 1.9 per cent and prices rose by 18.9 per cent, the initiative failed to meet its goal: the reduction of caloric intake.

Instead, the country’s lower-income households were ravaged by the additional tax. Soft drink taxes are largely taxes on low-income individuals, with negative consequences greatly outweighing the marginal health benefits. This is the conversation Oliver should be having.

Oftentimes, when SFBTs are enacted, consumers either purchase them from a neighbouring jurisdiction or substitute the product with other goods that hold similar nutritional characteristics.

For example, when Denmark enacted SFBTs, the country saw a dramatic increase in transborder purchases from other countries such as Germany and Sweden. No matter what, individuals will find other ways to get the products they want. But for consumers that can’t afford to travel to purchase their desired foods, they end up paying more out-of-pocket.

SFBTs such as a Canadian soft drink tax are regressive at best. As seen from the same Mexican study, 61.7 per cent of soft drink tax collections came from households with a low socioeconomic status.

Similarly, the Philadelphia soft drink tax disproportionately impacted poor people and even resulted in job loss. If Oliver is concerned about Canadians knowing the truth about soft drink taxes, he should highlight just how disastrous its economic impact is.

Canada needs good public policy, and we should be wary about adopting initiatives championed by a celebrity chef who won’t be subject to the policy’s consequences.

The economic damage done by soft drink taxes — and their lacklustre job in achieving their goals — can be seen in cities across the United States. Cook County, home to the City of Chicago, recently announced the repeal of their soft drink tax due to its stifling economic impact and lack of success. In New York City, courts struck down the city’s soft drink regulations as government overreach.

Cities that have enacted these paternalistic regulations are re-evaluating their decisions, and finding such initiatives end up being a mistake. Canada shouldn’t make that same mistake.

David Clement is the North American Affairs Director for the Consumer Choice Center and resides in Toronto.