Flat White

The Greens soft drinks tax: illiberal, ineffective, regressive

22 June 2016

12:00 AM

22 June 2016

12:00 AM

This Greens’ proposed soft drink tax is not only an affront to individual choice, it would do little to address obesity and, in practice, amounts to an attack on poorer Australians.

Greens leader Richard Di Natale have announced a new policy for a 20 per cent tax on sugary sweetened drinks to tackle obesity. The new impost will apply to water-based drinks with more than 5g of sugar per 100ml, increasing the price of a 2 litre bottle of drink by about 45 cents.

Taxing soft drinks, using the coercive power of the state to manipulate individual behaviour, is patently paternalistic.  The policy treats parents as fools who are unable to raise their own children, and adults as mugs incapable of making their own consumption decisions.

The policy flies in the face of the Greens’ supposed social liberalism, however this should come as surprise coming from the party that has previously proposed banning junk food advertising.

Various studies have also seriously questioned the effectiveness of such taxes on overall rates of obesity.

A study published in Journal of Public Economicsfound that although the tax may slightly reduce consumption, “this reduction in soda consumption is completely offset by increases in consumption of other high-calorie drinks”.  Another study published in Contemporary Economic Policy similarly found that sugary drink taxes do not have a substantial impact on population weight.

Although increasing the cost of soft drinks may reduce their consumption, it does little to change overall dietary decisions. If we make one product more expensive, individuals looking for a sugar hit can, and will, swap to other unhealthy drinks and food.

The Greens’ policy would, for example, push up the price of regular Coke though not change the cost of Diet Coke and Coke Zero, which contain no sugar. In reality these alternate beverages are not particularly healthier.

Perhaps the biggest injustice of the tax will be who it impacts the most: the poor.

A study of French dietary habits published in the American Journal of Agricultural Economics found that fat taxes are “extremely regressive”. That is, they have a far bigger impact on lower income households who have the least capacity to pay for the additional impost.

The regressive nature of taxes that seek to discourage conduct was explored in John Stuart Mill’s seminal work of political philosophy, On Liberty, first published in 1859.

Mill argued that we should only tax goods to make them more difficult to obtain if we support total prohibition, because: Every increase of cost is a prohibition, to those whose means do not come up to the augmented price.

This is particularly potent point: the wealthy can easily pay the extra 20 cents for a can of drink. It is only relatively poorer members of our society who will suffer under the Greens’ policy. And, as the tax does not change habits or appetite, they will likely substitute to other unhealthy consumption.

The final practical justification of such a tax is that it is necessary to address the societal and public health costs of obesity. However, an investigation of a 20 per cent sugary drink tax by the Obesity Policy Coalition earlier this year found that the tax would raise $10 billion over 25 years, and save just $480 million in government expenditure over the same period. This makes it far more of a tax grab than a way to compensate for government service delivery costs.

Obesity is a complex problem, impacted by changing cultural habits and best addressed through voluntary changes in individual behaviour: the classic formula of improving your diet and getting more exercise.

Although a tax on sugary drinks might sound like an easy solution, it would be extraordinarily paternalistic, ineffective and have a regressive impact on poorer Australians.


Matthew Lesh is a Research Fellow on the Future of Freedom Program at the Institute of Public Affairs. He can be followed on Twitter at @matthewlesh.

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