Soda tax health claims go flat
Like a dropped bottle of pop, soda taxes have exploded around the world with a mighty blast.
In recent years, taxes on sugary drinks meant to fight obesity have appeared in France, Chile and Mexico as well as many cities across the United States. Britain is launching a national soda tax this coming April.
Canada has so far avoided this contentious policy, but there’s a constant demand from many public health groups — much of it supported by research from the University of Waterloo.
Last year a report commissioned by the Heart & Stroke Foundation from the University of Waterloo’s School of Public Health and Health Sciences made national headlines for its astonishing claims that a 20 per cent tax on sugary drinks would save 13,000 lives, prevent 200,000 cases of diabetes and earn $1.7 billion in annual tax revenue across Canada.
Now the same work by the same authors is being used by the Alberta Policy Coalition for Chronic Disease Prevention in its campaign for a 20 per cent provincial soda tax based on claims this will save 1,200 lives, avoid 21,700 cases of diabetes and raise $3.5 billion over the next 25 years in Alberta alone.
Got that? Taxing soda reaps huge health benefits. Why? Because University of Waterloo researchers say so.
Too bad it's just magical thinking.
Last year I pointed out a significant flaw of logic in the University of Waterloo’s methodology. The study claims a 25-calorie per day reduction in pop consumption caused by a 20 per cent tax would lead to a noticeable decline in obesity rates and that long list of glorious health benefits.
Inconveniently, Canadians have already experienced an even bigger reduction in soda consumption. Due to changing tastes, pop drinking fell by about 28 calories per day in Canada between 2004 and 2014. And what happened to obesity over this time? It went up.
In other words, soda consumption is entirely irrelevant to health or obesity. The relationship between food and health is far too complex and unpredictable to sustain arguments that a tax on one type of beverage will create an unambiguous improvement in health of the precision claimed by that much-cited University of Waterloo report.
Now, however, you don't have to rely on my reasoning skills to come to the conclusion soda taxes don't work. Evidence is piling up from all over the world.
Last year the New Zealand Ministry of Health commissioned the respected New Zealand Institute of Economic Research (NZIER) to study the global body of evidence on sugar and soda taxes. The researchers looked at almost 50 academic studies over the past five years.
Their conclusion: “evidence that sugar taxes improve health is weak.”
NZIER examined the argument for soda taxes from a rigorous economic perspective. This makes sense since taxes are an economic tool and arguments in favour of soda taxes are economic in nature — by making sugary beverages more expensive, advocates seek to convince consumers to drink less, and hence become healthier.
At the risk of getting too deep into the analytic weeds, claims that soda taxes will have a massive impact on public health are heavily reliant on assumptions about price elasticity — the economic term for how much demand will drop given an increase in price.
The University of Waterloo study uses a very large estimate for price elasticity of -1.2; that is, for a 10 per cent increase in soda price, demand is expected to fall by 12 per cent. This is what generates those big results regarding lives saved and disease avoided.
According to NZIER, however, reports like the one from University of Waterloo are relying on “flawed” or exaggerated estimates of price elasticity. Based on observations from Mexico, which introduced a soda tax in 2014 of one peso per litre and now offers several years of real-world evidence, it appears a more credible figure for pop price elasticity is around -0.3. That is, consumption can be expected to fall by a mere three per cent given a 10 per cent tax hike.
While price elasticity remains a hotly-debated topic, this new lower figure is backed by industry data that shows soda sales are once again on the rise in Mexico, after briefly falling when the tax was first introduced.
Plug these new numbers into the University of Waterloo's soda tax computer model, and all those tens of thousands of lives saved and hundreds of thousands of incidents of disease avoided will disappear in a poof.
“The tax on sugar-sweetened beverages in Mexico is unlikely to have made any difference to body weight significant enough to translate into health benefits,” the economists at NZIER observe.
They find there isn’t even enough evidence to support a “slight causal link” between food and drink taxes and improvements to population health of the sort the University of Waterloo study loudly touts. “We have yet to see any clear evidence that imposing a sugar tax would meet a comprehensive cost-benefit test,” the New Zealand report concludes.
A soda tax can do a lot of things. It can raise massive amounts of new revenue for governments, punish big corporations and interfere with individual consumer choice. What it can’t do, however, is make people thinner or healthier.