Industry Sponsored Study on Junk Food Taxes – Junk In, Junk Out

Geoff SimmonsHealth

The New Zealand Initiative’s new report makes many claims about the evidence on ‘sin taxes’, particularly the current trend towards sugar taxes. Like most economics, and science in general, the answer you get depends on your assumptions and the questions that you ask.

The New Zealand Initiative are not interested in reducing obesity, or preventing the looming diabetes crisis where 1 in 3 Kiwis will have the disease. They make no attempt to understand the causes, and don’t propose any way to deal with these issues.

In fact, under their analysis these trends are seen as a good thing. People are eating and drinking whatever they want and so the consequences must be worth the joy junk food brings. This is the ‘rational man’ model in its purest form. If you ignore diabetes and health generally and focus on perceived “freedom”, of course junk food taxes make no sense. This assumption places the burden of proof entirely on the proposer of the sin tax, and removes it from the shoulders of the food, tobacco and alcohol industries (who by the way contribute to the Initiative’s coffers). With that approach it is always very easy to claim that the evidence for a tax isn’t good enough.

Back to reality. If you actually want to reduce diabetes and obesity, then a junk food tax is one of the most cost effective tools that we have compared to education alone or doing nothing more than our current do nothing plan. We face a similar debate on most difficult issues including climate change – it is always easy to justify doing nothing and waiting for so called ‘absolute proof’. Making decisions based on current evidence – i.e. in the real world – and it is always more difficult.

Cry Freedom!!!

The first half of the Initiative’s report is a summary of Ayn Rand’s work on life, liberty and the American, sorry, Kiwi way. Freedom of choice is paramount, and strong justification is needed to remove it in favour of the “nanny state”. This is a nice, simple and self-centred philosophy that can always be employed to justify doing nothing.

Whose Your Nanny?

Lets for a moment taint this philosophy with reality. We already have a health system and welfare state that picks up the tab for our personal choices, however poor they are. Our ‘nanny state’ is well in place, thanks to popular demand. Ironically then junk food taxes should be seen more as an instrument of user pays rather than nanny state. In other words the complete opposite of this business funded think tank is claiming.

The Initiative’s response to this is to ask why can’t people opt out of the health system and welfare state? This is a glib and ill-considered throw-away line which they haven’t bothered to develop into a serious policy proposal, potentially because it would undermine the entire point of a public system. For instance, as we see in the United States private insurance works okay until people are too poor or too old to pay for it. Do they let them die in the street? No, they become a burden on the state.

What is Freedom?

Despite telling us all about what good research looks like in the report, the NZ Institute make no attempt to test their basic assumption about taxes on sugar, tobacco and alcohol being an impediment to personal freedom with any research rigour.

They don’t look at the work of Nobel Prize winner Amartya Sen, whose definition of freedom equates to equality of opportunity – the idea that all kids should get a fair start in life. Nor do they look at the epigenetics research, which suggests that the environment a child is exposed to will alter their choices for life.

With this in mind you could argue that kids growing up being bombarded by cheap, convenient junk food are having their freedom grossly infringed. Why should we allow the junk food industry to target children with clever psychological tactics? Why do we allow our kids to be surrounded by junk food when they cannot make rational choices and don’t understand their decisions as a child will decide their lifetime path as an adult?

So if donuts, alcohol and cigarettes make us happy, why not cut loose? The Institute asks would you rather eat donuts and be fat and happy or eat salad and be skinny and miserable. Apart from the cartoon-like depiction of a complex issue, they have clearly missed a lot of the modern neuroscience. The dopamine that drives us to eat donuts can often lead to regret, while the serotonin generated by eating salad is much more likely to give long term feelings of content.

Homo economicus

The Institute acknowledges that children don’t have the ability to make informed choices, but then put the issue squarely in the lap of parents – again without any evidence about how much control parents can exert in modern society. Nor do they test the evidence around whether people actually value choice, or whether they see tax and regulation as an infringement on their freedom. The latest Colmar Brunton poll suggested 66% of people supported a sugar tax – so does that show that they are choosing to restrict their choices? How does the Institute square that circle if choice is paramount?

In fact, the report seems devoid of any research outside a narrow economic focus. The food industry has funded an enormous amount of psychological research on how to influence people to eat more junk food through packaging, advertising, product placement etc, much of which is publicly available, but which the New Zealand Institute has roundly ignored. Ironic, given that they funded by the same organisations that funded this psychological research. The Food industry’s own research shows our choices are hugely influenced by the environment that surrounds us, but the New Zealand Institute conveniently prefers to cling to the oversimplification that we are all rational economic units – known as homo economicus. One wonders why their sponsors spend so much money on advertising, packaging and product placement.

So do sin taxes work?

Once you decide that liberty is paramount, rather than people living longer healthier lives, it is easy to pick holes in the evidence and reduce public policy to state of analysis paralysis. Don’t do anything until we have 100% water tight proof (which isn’t how science works by the way) and by which time taking action is far too late to make an impact. They then trot out all the old arguments that have been covered before:

Sugar taxes don’t work – we’ve already covered this claim at length. Actually the report doesn’t prove this claim. What they really mean is that sin taxes don’t work enough to make them feel like it is worth losing their liberty – more a point of opinion than fact.

Tax could only raise revenue or change behaviour, not both – we’d agree but if a corrective tax raises revenue then all it’s saying is that the tax needs to be higher to change behaviour.

A tax would be regressive – actually, if you take health and the way money is spent into account, that’s incorrect.

Education is better – this wasn’t in the report but that hasn’t stopped the Institute stating it in the media around the report. They present no evidence that education would get better outcomes than a more comprehensive package including taxes (because there isn’t any), no studies of effectiveness or cost, and no plan for how to roll it out.

There are poor quality studies therefore all the evidence is flawed – this baby out with the bathwater approach would render all scientific efforts entirely useless. As we have explained in an earlier blog there are extremely clear processes scientifically developed to assess appropriate study design and quality. There are limitations in some the studies but these have been accounted for in the conclusions that scientists have come to. Is the NZ Initiative really claiming to know the body of evidence better than the WHO?

In summary, if the NZ Initiative wants to shake the perception of being a corporate funded think tank, they need to apply the same rigour to their own ideological preconceptions that they apply to the work of others.

Industry Sponsored Study on Junk Food Taxes – Junk In, Junk Out was last modified: April 21st, 2016 by Geoff Simmons
About the Author

Geoff Simmons

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Geoff Simmons is an economist working for the Morgan Foundation. Geoff has an Honours degree from Auckland University and over ten years experience working for NZ Treasury and as a manager in the UK civil service. Geoff has co-authored three books alongside Gareth.