Should We Tax Sugar?

And how should we tax sugar? The science and the economics are more difficult that one might think.

There is a rising obesity epidemic here and abroad. Obesity impacts on people’s health, their longevity and the costs to the medical system (in that order of importance). One response has been that there should be a tax upon sugar-sweetened beverages (SSBs). That would discourage their use, reduce the sugar intake and reduce obesity – or so say the advocates.

Before analysing the policy in detail, let’s take a step back and ask whether the obesity epidemic is caused by sugar. When I read the literature I recalled parallels with tobacco.

We now know that smoking causes cancer and heart conditions. An unproven suspicion began in the 1920s when doctors began noticing that their lung cancer patients were more likely to have been smoking. (We also now know that smoking causes other cancers too.)

But correlation does not prove causation. Perhaps those prone to have cancer also smoke. In any case, the possible biological transmission mechanisms were only vaguely understood. A difference with sugar is that the health damage from tobacco is slow to appear, Any route from sugar to obesity is faster and we know a lot about the impact of obesity on health particularly on cardiovascular disease, diabetes mellitus type 2, obstructive sleep apnoea, certain types of cancer, osteoarthritis, and asthma and the resulting shortening of life expectancy.

Any suspicion of the damage from tobacco was not enough to discourage  military authorities from providing cheap ciggies during the Second World War. More than 80 percent of males smoked; the rate for women was much lower. After the War, male rates began to fall while female ones rose and even surpassed them. Both are now falling. Evidence accumulated in the 1950s, with population surveys by such as British epidemiologist Richard Doll. But they were not overpowering proof, although sufficient for the US Surgeon General to issue a health warning. At the time the finding was ‘on the balance of probabilities’. Many doctors were sufficiently convinced to stop smoking. The follow-up research found their health improved compared to doctors who did not. The verdict switched to ‘guilty beyond reasonable doubt’. The medical profession campaigned to end smoking and others joined them, Smoking rates have since fallen markedly and so has tobacco-induced disease and death.

My reading is that the verdict on sugar as a cause of the obesity epidemic is currently ‘on the balance of probabilities’, where tobacco was half a century ago. The evidence is all over the place but I found the following useful.

The best data available suggests that the world obesity epidemic took off in the 1970s. While obscure factors may each play a role, none appears powerful enough to explain the general trend.

Our exercise levels and calorie intake may not have changed much since then. Diets have. The British today buy half as much fresh milk per person, but five times more yoghurt, three times more ice cream and 39 times as many dairy desserts. They buy half as many eggs but a third more breakfast cereals and twice the cereal snacks; half the total potatoes, but three times the crisps. While direct purchases of sugar have sharply declined, the sugar consumed in drinks and confectionery is likely to have increased.

New Zealand has less data; the evidence from the 1997 and 2008/9 Ministry of Health's New Zealand Adult Nutrition Surveys is far from conclusive, even suggesting a slight fall in sugar consumption despite a rise in  obesity. One expert who contributed to the report told me that the data would not support a sugar tax (in general or on sugar sweetened beverages) with the objective to reduce levels of obesity in NZ.

(The last child nutrition survey was in 2002. There was meant to be a survey every decade but what with the GFC and tax cuts on the rich, a monitor on children’s health was deemed of much lesser importance.)

Overseas, the argument goes on that their shift has not happened by accident. The film, The Men Who Made Us Fat, argues food companies have designed products that use sugar to bypass our natural appetite-control mechanisms, and packaged and promoted their products to break down what remains of our defences. Perhaps this is a bit conspiratorial. But even if we discount most of it, it makes a prima facie case.

Micro-studies buttress the argument. It has been proposed that there was an ‘eating addiction’ in which the addicted – far too many of us – tend to seek out a range of highly palatable, energy-dense foods. The activation of reward systems in the brain and the loss of impulse control are similar to those involved in dependency on drugs although eating addiction may be more powerful and is certainly more widespread.

An article in the Lancet suggests that biological changes lock the obese into fatness. The brain becomes habituated to dopamine signaling (the reward pathway). If one tries to lose weight, the body thinks that it is being starved, and powerful metabolic adaptations try to return it to the previous state.

Some of the research is pessimistic about treatment, suggesting that once obesity is established the body-weight seems to become biologically fixed so that if you have once been obese, staying slim means sticking to a strict diet for life in a sort of ‘obesity in remission’. Sounds like the struggle that recovering alcoholics have, perhaps worse, because you cannot knock off eating forever.

Convinced? I reckon the overseas case is not at the hanging offence stage.

Suppose we conclude the obesity epidemic is driven by sugar intake? Tobacco (and, to a lesser extent, alcohol) excise taxes discourage consumption. Why not tax sugar?

But surely all sugar, not just sugar-sweetened beverages, which represent a sixth of total consumption – more in the young. Presumably the advocates know taxing SSBs is relatively easy and perhaps there are advantages in targeting the young before they become eating addicted.

But is not the logic to tax all sugar? It would be administratively complicated (especially as it will be necessary to tax the sugar in imported final products such as overseas-made confectionary).

Will it have any effect? There is evidence that a heavy tax on SSBs reduces their consumption but what about the other five-sixths? Not only is there little evidence on what a comprehensive sugar tax would do to demand, but it overlooks one of the more powerful channels. Food producers will cut back the sugar they use. One of the differences from tobacco is that we do not know how much sugar we consume – we do know the number of cigarettes. The manufacturers do, and the threat from competitors will give an incentive to reduce consumption.

The government has said that is will not introduce any new taxes in its first term. That gives them time to plan the taxation of sugar: to see how strong the evidence is and enable to work out the apparent inconsistency between the NZ and the overseas data. Morever it gives us time to work out how to impose a tax efficiently. The government would then promise to introduce it after the next election. Meanwhile, let advocates make a case to the public to increase the palatability of the tax.

One niggle. Discussions on raising taxes tend to be one-sided, focusing on the burden of the new taxation but never mentioning the additional revenue to be used for additional public spending or lower taxes elsewhere. That partly reflects the neoliberal frame that persists in our public policy. It also reflects a fiscal distaste for ‘tied’ taxes, used for particular purposes. (Taxes on motorists for transport are almost an exception.) Might I suggest the government promise to increase public funding on healthcare partly funded by the revenue from a sugar tax? If we do not do something about obesity there is going to have to be a lot more spending anyway.