What Health Tax Would You Apply?

---

On the 1st of September last year, the excise on cigarettes rose by 13% in Australia. A single pack of Winfield Blues went from $32.50 to $35.20.

The government of Australia wants people to stop smoking. Another reason for this jacking up of smoking cost could be there to fill a deficit in the economy (after all, between 2016 and 2017, the government brought in $10.69 billion in tobacco excise), as well as to cover the increased public health cost that will result from the long term effects of smoking. But that’s another topic for another time.

Now, whether this price increase makes people stop smoking is up for debate. For some, it may very well be the small push they need to get rid of the addiction finally. For others, no amount of price increases is going to stop them from smoking.

However, the idea of health taxes as an incentive for behavioral change sounds interesting, and it’s worth exploring in other areas.

 

Sugar Health Tax

According to the World Health Organisation, a sugar health tax can incentivize people to reduce their sugar intake. For example, a can of soft drink can contain as much as ten tablespoons of sugar, which is four more than the recommended daily intake.

Also, according to statistics, two out of three adults in Australia were overweight in 2014-2015. The rate of obesity has also increased to 28%.

In theory, by imposing a sugar tax, many people will limit their sugar intake in one way or another. For example, a lot of people can switch to diet sodas (zero sugar, zero calories) or water.  

In 2014, Mexico introduced a sugar tax. Two years later, an analysis of sugary drink purchases found a 5.5% drop in the first year and a 9.7% in the second.

Whether sugar taxes work long-term is still up for research, but a steady 7.6% of annual decline looks promising.

 

Alcohol Health Tax

Whilst small to moderate amounts of alcohol may deliver some benefits such as better insulin sensitivity, better cardiovascular health, and longer lifespan, more likely, alcohol consumption can lead to high blood pressure, heart problems, liver disease, and dependency problems.

According to statistics, one in six Australians consumes alcohol at doses that place them at risk of developing a disease. 

However, it’s worth noting that economist worldwide have concluded that alcohol consumption is relatively inelastic, meaning that price changes don’t affect consumption rates much. A good explanation for that is people change the alcohol of choice, rather than the quantity.

 

Physical Activity tax

From the outside, this sounds quite difficult to pull off. However, tax incentives that promote physical activity have been introduced in Canada. One of the more prominent ones is Children's Fitness Tax Credit which came to life in 2007.

We know full well that a sedentary lifestyle can lead to numerous health and mental problems, so adopting strategies to make the general population more active can be a good idea.

There are limitations, though. For example, how do we quantify ‘physical activity’ and how do we keep track of it?

An idea worth exploring is ‘steps taken per day’ day. Taking 10,000 to 15,000 steps per day is associated with better health and a lower bodyweight. And since fitness trackers have become better and better over the years, and most people have smartphones, there are dozens of apps that do the job well.

This is not only a good way to track physical activity, but can also incentivize a more active lifestyle for the majority of populations, fewer health problems, and a reduction in rates of obesity.