Liberal economist and Hillary Clinton supporter Paul Krugman has taken sides in the battle over soda taxes between Clinton and Sen. Bernie Sanders.
After Clinton voiced her support for the mayor of Philadelphia’s plan to slap a three cents tax on per ounce of soda, Sanders hit back, saying such a tax would hit the poor hardest.
Krugman came to Clinton’s defense in his New York Times column. “It does seem worth pointing out that progressivity of taxes is not the most important thing, even when your concern is inequality,” writes Krugman.
“If we add in the reality that heavy soda consumption really is destructive, with the consequences falling most heavily on low-income children, I’d say that Sanders is very much on the wrong side here. In fact, I very much doubt that he’d be raising the issue at all if he weren’t still hoping to pull off some kind of political Hail Mary pass.”
Krugman concedes that poorer people will pay a greater share of their income to buy soda than rich people, which is apparently worth it since poor people are the most vulnerable to evil soda companies.
According to a research note from the free-market think tank the Institute of Economic Affairs (IEA), Sanders is right on the money when it comes to whose pocket books are most impacted by a soda tax. (RELATED: Bernie Sanders Is Right, Soda Taxes Hit The Poor Hardest)
Both real-world evidence and economic theory make a mockery of the notion that taxes suffice to substantially tackle obesity, says the IEA’s head of lifestyle economics, Christopher Snowdon.
One of the key reasons soda taxes don’t work is the demand for sugar-filled drinks and fatty foods tend to be inelastic – meaning people continue to buy the products in large amounts despite the higher price.
Even if people were to change their behavior in response to higher taxes, consumers will often just switch to cheaper brands or buy their groceries from cheaper shops. “This leads to the consumption of inferior goods rather than the consumption of fewer calories,” says Snowdon.
The IEA points to the example of Denmark’s so-called “fat tax,” which was introduced in October 2011. The tax proved so ineffective, with people switching to cheaper brands or buying the products they preferred from across the border, that it was repealed in January 2013. The tax was also hugely unpopular.(RELATED: Hitting The Poor, Why Sugar And Soda Taxes ‘Defy Basic Economics’)
A tricky problem for politicians hoping to introduce similar taxes in the US is the poor spend a greater share of their income on the bare necessities, any taxes targeting these goods will have a disproportionate impact on the poor.
The IEA’s previous work on “sin taxes” shows the poorest 20 percent of UK households spend roughly $2,000 per year on sin taxes, amounting to around 11.4 percent of their disposable income.
Leaving aside the harm done to the pockets of the poor, sugar taxes may not even have an impact on people’s health. “No impact on obesity or health outcomes has ever been found,” Snowdon writes. “Early evidence from Mexico suggests that a ten percent tax on sugary drinks led to an average daily decline in consumption of 36ml per person.”
“As Tom Sanders, a professor of nutrition and dietetics, notes, this is the equivalent of 16 calories and is ‘a drop in the caloric ocean. Long-term reductions in total energy in the range of 300-500 kcal/d are probably needed to prevent obesity.’”
Snowdon concludes by citing a systematic review of 880 studies that found “the public health case for using economic instruments to promote dietary and physical activity behavior change may be less compelling than some proponents have claimed.”