The Task Force on Fiscal Policy for Health, co-chaired by Michael Bloomberg and Lawrence Summers just launched a report calling on governments to substantially raise taxes on tobacco, alcohol, and sugary beverages. Such policies could avert an estimated 50 million premature deaths while raising $20 trillion of new revenues.
To learn about the report, please join The Center for Global Development tomorrow at 11am ET for a panel discussion with Masood Ahmed, Mauricio Cardenas, Amanda Glassman, and Victoria Perry on the topic.
This isn’t particularly new news to the global health community which has been pushing for increased taxes to reduce consumption of products which are toxic to health. But it IS news that this Task Force has issued such a strong report for at least two reasons.
First, the composition of the Task Force is unlike any other group to address the unprecedented epidemic of non-communicable diseases being unleashed by growing consumption of tobacco, alcohol, and sugar in processed foods. Co-chaired by Mayor Michael Bloomberg and Lawrence Summers, the Task Force included three members with experience as Heads of State and four who are or have been finance ministers. It also included the former Director General of WHO Margaret Chan; Norway’s Health Minister Bent Høie; economists from China, the UK, and the US; and CGD’s president Masood Ahmed.
In other words, this is a task force composed predominantly of political leaders and economic policy experts from outside the health field who are issuing a call to action on a big and growing threat to population health, particularly in low- and middle-income countries.
This is big news for a second and related reason: it shows the power of evidence. The Task Force came to its conclusions after commissioning background papers and reviewing research that demonstrates the magnitude of the threat to health and the effectiveness of excise taxes in reducing consumption and saving lives. The Task Force acknowledged the extent to which market failures and misinformation are distorting consumer choices and the way manufacturers have misled the public and policymakers.
This is why I think the launch of this report will be a watershed for the international debate over health taxes. Economists and fiscal policymakers are going to hear these messages and increasingly recognize that raising taxes on tobacco, alcohol, and sugary beverages is an essential component of an efficient tax strategy as well as a boon to health and the economy.
The background work for the Task Force Report included a simulation that showed if taxes were increased to raise prices on all three products by 50 percent, over 50 million premature deaths could be averted worldwide over the next 50 years while raising over US $20 trillion of additional revenues in present discounted value. Raising taxes and prices further in future years would save additional lives and raise even more revenues.
It is worth listing the Task Force Report’s five key messages because they are concise and comprehensive:
Tobacco, alcohol, and sugary beverages consumption accounts for a large and growing share of premature death and disease, especially in low and middle-income countries. Some eight million people die each year from diseases associated with smoking; another three million from alcohol; and 4.5 million from obesity and diabetes. Sugary beverages directly contribute a small part to the obesity epidemic but are a clear and growing part of that health threat. Without action today, the disease burden attributable to these products is going to rise.
Raising the price of tobacco and alcohol by increasing excise taxes reduces consumption and saves lives, while generating additional tax revenues. Evidence is accumulating that excise taxes on sugary beverages can do the same. Yet, these taxes are underutilized as a policy tool.
The economic rationale for raising excise taxes on tobacco, alcohol, and sugary beverages is well-established. The markets for these products are characterized by significant market failures that result in harmful consumption, preventable deaths, and large economic costs to society.
Implementing taxes on products that harm health is a test of government effort and resolve. Affected industries vigorously oppose tax increases with false or misleading statements related to revenues, employment, illicit trade, and impacts on the poor. Most of this criticism fails to stand up to analysis; none of it justifies inaction.
Raising taxes on tobacco can do more to reduce premature mortality than any other single health policy. Raising taxes on alcohol will also significantly reduce premature deaths and disability. Raising taxes on sugary beverages is prudent because taxes can incentivize healthier diets and address the growing burden of disease from obesity and diabetes. Taxes on all three products would raise valuable revenues.
The economic and health arguments are sound. I hope this Task Force Report will provide a boost to the political strategies that are required to implement this cost-effective strategy and push back against the patterns of consumption that are already costing the lives and livelihoods of millions of people every year.
Disclosure: Along with CGD’s Amanda Glassman, I was privileged to provide technical support to the Task Force.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.