Will sales tax influence consumption?

EDITOR—Marshall has produced an original but flawed article, opening debate on public and preventive health by arguing that serum cholesterol concentrations are closely related to diet and to ischaemic heart disease; that dairy produce, pastries, and puddings account for more than 40% of the saturated fat in the British diet; and that introducing value added tax (VAT) at 17.5% on these foodstuffs, but leaving foods such as semi-skimmed milk and low fat margarine VAT free, could, because of “price elasticity” in demand, save 900 lives a year.1

This raises the question, why do we have sales taxes? Assuming that your country isn't engaged in protectionism, there are two reasons: to raise revenue and to influence demand towards more desirable commodities—for example, lower taxes on unleaded petrol. Taxes on tobacco and alcohol have been largely in the first category (the puritanical element in British society no doubt delighted in the added expense of such sinful pleasures). But they are moving, especially taxes on tobacco, towards the second category. VAT is not paid on most foodstuffs, although it is paid on luxury items. But Marshall proposes making foods that damage health liable to VAT as well.

Three issues arise:

• Equity: although Marshall acknowledges that such taxes are regressive—that is, they fall most heavily on poor people—he shoots himself in the foot by proposing to compensate poorer people by diverting the extra VAT into higher benefits. Such “hypothecated taxation” is not popular, and with their spending power restored poor people will buy exactly the same foodstuffs. Also, although this system compensates those people on welfare, it does little for those people who are employed on low wages.

• Practicality: the wealthier, and healthier, have already ceased smoking, changed their diet, and joined gyms. These people with high living standards have clear interests in …