Sin taxes work and don’t disproportionately harm the poor, study says

Taxes are an effective way of reducing the consumption of cigarettes, alcohol and some unhealthy foods, according to a new set of studies. Getty Images File

Taxes on cigarettes, alcohol and sugary sodas can have important public-health impacts and are an important tool for reducing the burden of many diseases, according to a new series of studies.

A series of papers published Wednesday in The Lancet examines non-communicable diseases, such as diabetes and heart disease, and whether taxes can be used as a way to address people’s consumption of things – like alcohol and tobacco – that contribute to such diseases.

“The effectiveness is fairly well-established,” according to Franco Sassi, a professor at Imperial College London and author of one of the papers. “On tobacco and alcohol, we have had evidence for many years that showed that basically, people do react to the changes in price that the taxes cause and reduce their consumption as a result.”

What he examined in his piece was a common critique of sin taxes: that they disproportionately harm the poor, since poorer people can’t afford to pay a higher price.

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While it’s true that low-income people tend to reduce their consumption of things like alcohol or tobacco in response to tax increases, he said, even if they still end up paying some extra money, the health benefits are so enormous that they may still come out ahead financially.

For tobacco in particular, “These health benefits translate into economic benefits down the line because these people become more productive on their jobs and they have better-paid jobs that end up offsetting any taxes that they may be paying, more than high-income people.”

Many poorer people also have to pay the costs of tobacco or alcohol-related diseases, according to Rachel Nugent, chair of The Lancet NCD economics taskforce. “If we use these economic tools to reduce consumption among the poor, it turns out the poor may be benefited more than others because they are going to save money on medical costs, they’re going to save money on unhealthy products and they’re going to consume less and be healthier.”

In countries like Canada, where most health care is paid for by the state, taxpayers end up paying for the medical costs caused by diseases related to tobacco, alcohol and junk food, she said.

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She doesn’t buy the criticism that these kinds of policies are a “nanny state” approach that reduces choices among low-income people. “If you take a longer-term view of it, you have to ask, ‘What is it people really benefit from?’ They benefit from a long happy healthy life.”

Poll after poll shows that people often want to reduce their alcohol or tobacco consumption, she said.

“Taxes are the most effective way to get people to quit something they already say they don’t want to do.”

David Hammond, professor in the School of Public Health and Health Systems at the University of Waterloo, says that these studies are “totally consistent” with previous research on the effects of taxing tobacco.

“In tobacco, people refer to taxation as the most effective policy measure that we have,” he said. Much of that evidence comes from studies in countries like Canada, where research showed that taxes helped to reduce tobacco consumption.

“What the article is suggesting is that overall, taxes are likely to have even greater impact on the health status of lower-income people and when you factor everything in, it may even be of benefit to them financially.”

Nugent believes that governments shouldn’t hold off on these tax policies because of concerns about harming low-income people, though she cautions that there isn’t enough evidence yet about the effectiveness of taxes on junk food or soda.

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Sassi thinks that taxes also shouldn’t be the only policy that governments try. “Taxes are not a magic bullet,” he said. He believes there should also be regulations to show more nutritional information on packaging or to prohibit advertising to children, as well as educational programs.

Taxes are also made more palatable when their revenues are directly used to support public-health programs, said Hammond.