Taxing Soda and Booze Can Spark Healthy Spiral, Experts Say

(Bloomberg) -- Nobody likes taxes, but new research shows they can be good for your health.

Taxing products such as soda, alcohol and tobacco can steer consumers toward healthier choices and avert a ruinous tumble in which obesity fuels disease and medical costs push people further into poverty, data from countries ranging from Chile to India show. The analysis was published Wednesday in The Lancet medical journal.

A tax on unhealthy goods “is probably the single-most important measure that can be taken to reduce death and suffering,” Larry Summers, the U.S. economist and former Treasury Secretary, said in an interview. “That's why I think it's important.”

Summers's commentary accompanied the Lancet report, which focused on ways to curb illnesses such as heart disease, diabetes and cancer that can be blamed for 38 million deaths each year. A research group pulled together five studies and found that taxes on unhealthy products can work without disproportionately harming the poor.

New MilkyBar

“The evidence suggests that concerns about higher taxes on tobacco, alcohol, and soft drinks harming the poor are overstated,” said Rachel Nugent, a health economics expert who works with a Lancet group as well as the World Health Organization on how to thwart non-communicable diseases.

When it comes to sweet drinks, more countries are willing to test taxes to tackle obesity along with budget deficits, potentially hurting companies such as Coca-Cola Co. and PepsiCo Inc., according to Bloomberg Intelligence. The U.K.'s own sugar tax experiment is scheduled to take effect Friday.

Wealthier households usually shoulder more of the tax burden because they spend more on alcohol, sodas and snacks, the researchers said in the Lancet. Poorer families also tend to reduce consumption more in response to higher prices. Such taxes work best if some of the revenue is used to fund programs for the poor, they found.

Companies are responding by working to cut sugar and calories. Nestle SA has started selling slimmed-down Milkybar chocolates in Britain and Ireland in the first implementation of a new technology that promises the same sweetness with 30 percent less sugar.

In Mexico, the introduction of a soft-drinks tax resulted in a 17 percent decrease in purchases among lower-income groups, and almost no change in higher-income groups, the Lancet report said.

Obesity, once seen as a problem plaguing only wealthier nations, is now on the rise in lower-income regions too. Countries must tackle it in the same way as malnutrition, said Summers, who chairs a task force on fiscal policy for health with Michael Bloomberg, founder of Bloomberg LP, the parent company of Bloomberg News.

To contact the reporter on this story: James Paton in London at jpaton4@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Marthe Fourcade, John Lauerman

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