It is no secret that taxes on common grocery items are regressive. In a piece published in The Telegram, president of the Newfoundland and Labrador Centre for Economic Freedom Devin Drover explains why these taxes fall disproportionately on those who can least afford them.
According to Drover, “the burden felt by a family with an annual income below $20,000 is nearly double the loss of economic welfare faced by families with an annual income over $100,000.” This is because low-income families are forced to spend a larger portion of their hard-earned money to pay for the tax. He also points out that seniors who are on fixed incomes really experience the brunt of such taxes.
Besides being regressive, Drover says taxes fail to reduce obesity rates. “…[A]n appeal to evidence suggests that such a tax would not only be harmful to our province’s most vulnerable, but would not improve health outcomes or reduce obesity rates,” states Drover.
Drover points to Denmark’s failed excise tax on certain foods and beverages to illustrate the ineffectiveness and harmful nature of taxes. He notes that the Denmark tax was repealed after only one year, “citing unintended consequences — notably, high administrative costs, job losses and strategic pricing practices by firms which kept the price of elastic fatty foods low while the cost of inelastic alternatives increased.”
Both studies and real-world experience have shown that taxes are nothing more than a Band-Aid that diverts us from real solutions to serious issues. To learn more about why taxes do not work visit The Truth About Beverage Taxes.