Taxes increase with new year

Monday, 06 January 2014 00:10 
BY MARK BITTMAN
The New York Times


The holiday season was once marked by belt-tightening, as fresh food became scarce. Now it is a fury of gluttony — and it’s not as if we’re restrained at other times. Yet with obesity-associated Type 2 diabetes at record levels, it’s widely agreed that we have to moderate this diet. Which means that, despite corporate intransigence, we have to slow the marketing of profitable, toxic and addictive products masquerading as food.

It’s logical to start with soda and other beverages sweetened with sugar or high-fructose corn syrup, which account for 7 percent of calories in the U.S. diet, and many public health specialists have recommended a steep tax to reduce consumption.

Ironically, France, which has a relatively low obesity rate, was the first to initiate a significant soda tax, and it seems to be reducing consumption — but its soda drinking was relatively low to begin with. Now, however, it appears we’re going to be able to judge such a tax, as well as the impact of a tax on junk foods, in a country known for obesity.

This new tax is scheduled to be imposed in the new year, not in the supposedly progressive public health bastions of New York or San Francisco (though that city looks set to vote again on a soda tax in 2014), but in a country many U.S. citizens view as backward: Mexico.

Barring an unlikely court upset, the new year in Mexico will bring a national tax of 1 peso per liter — roughly 10 percent — on sugar-sweetened beverages and 8 percent on junk food.

The legislation came about through a strong push by the Nutritional Health Alliance of 22 NGOs and networks representing some 650 nonprofits and grass-roots organizations, and an alignment of interests among President Enrique Peña Nieto, advisers in the Finance Secretariat (the rough equivalent of the IRS), and members of the opposition parties.

Industry will disagree, but sweetened beverages are generally acknowledged to be a direct cause of the obesity epidemic. The question, both in Mexico and in its immediate neighbor to the north (annual consumption in both countries is around 151 liters per capita), has been how to curb it. Although President Barack Obama murmured about a national soda tax in 2009, it never went beyond that, and attempts to establish taxes in various localities from New York to El Monte, California, have been defeated at the polls or otherwise blocked, always after huge industry campaigns.

The powerful Mexican soda and junk food industries were hardly asleep at the wheel this fall, and fear of losing their advertisers appears to have led major TV stations to refuse to run commercials advocating the tax. But several factors motivated Mexico’s president and legislature, including the fact that among populous nations, Mexico recently passed the United States to become the world’s most obese.

Beyond that, there’s an increasing awareness that Mexico’s accelerating public health crisis could hurt its economy, and that only prevention would make practical the universal, single-payer health care system instituted last year.

In addition, agreed-upon financial reform meant that all unconventional funding sources had to be considered seriously; the tax is expected to bring in around $1 billion a year, and proponents of the tax had successfully linked its passage to a campaign assuring that purified drinking water would be made available in every school in the country.

It may also be that the Peña Nieto government wanted to distinguish itself from its predecessors by claiming a new, highly visible place on the world stage.

Also critical to the new law was an agreement reached by the three major political parties, called “Pact for Mexico,” which essentially committed them all to not blocking anything that a majority wanted; specifically, if the party in office and one of the other two major parties wanted to pass one of 95 reforms necessary for the country to progress the third party would not resist. In other words, the nation’s future trumped partisan interests.

This has meant not only fiscal reform but more vigorous attempts to rein in corruption, break up monopolies in energy and communication, and aggressive public health moves, like the constitutional addendum of 2011 that guarantees all citizens “the right to nutritious, sufficient and quality food.” In fact the biggest take-away may be that the government of the country with the world’s 14th largest gross domestic product has placed public health above the profits of an important industry. Yes, this may have been a politically expedient calculation (and no, Mexico is hardly Nirvana), but the reality is that the regulation of an industry that needs regulation is happening. And there could hardly be a more important and legitimate role for government than attending to the health and well-being of its populace; we need not reflect too long on the inability or unwillingness of the government of the country with the world’s largest economy to recognize this.

Although the soda tax got most of the attention, other moves are also important. The junk food tax, first proposed at 5 percent but boosted to 8 when one senator argued that 5 percent didn’t even cover the public expenditure on health problems caused by junk food, will use calorific density to define processed foods that are detrimental to health.

The formula, which will exclude meat, dairy and other “real” foods, would tax those foods that contain more than 275 calories per 100 grams.

And although Mexico’s Constitution forbids “earmarks” — tax revenues for specific purposes — there’s at least preliminary agreement that much of the money from the new taxes be used for public health, including giving all schools drinking fountains that dispense purified water. (When asked if they were in favor of a soda tax, most Mexicans polled said no. When advocates linked the tax to obesity prevention, including clean water in schools, 70 percent were in favor). Especially in rural areas, people might end up using schools to get water for their homes, which would make it more likely that schools would be used to distribute subsidized fruits and vegetables, another goal of public health advocates.

Sugar (and by extension sugary beverages) is one of the three luxuries — along with tobacco and rum — described by Adam Smith as “extremely proper subjects of taxation;” it has proved to be the toughest to tax of the three. And although the soda tax is being hailed by supporters on both sides of the border (the American Heart Association said in a statement, “Mexico’s effort provides an excellent starting point, but we need U.S. states and communities to enact the tax as well”), there is also wariness, because the tax is roughly half what research indicates to be the super-effectiveness threshold of about 20 percent. The peso-per-liter level is still meaningful, however.

When I visited Mexico City recently, tax advocates told me that the new moves made it painfully clear that the previous administrations did nothing to prevent the obesity crisis (indeed, the next-to-last president was a former president of Coca-Cola Mexico). The new government has raised the stakes in defining a quality diet.

Thanks largely to proximity (and NAFTA) Mexico has suffered more from adapting the standard U.S. diet than any other country. Everyone, it seems, is surprised that these taxes are going forward. It would be fitting if they paved the way toward a saner diet.