Alex Illingworth: The Sugar Tax & Wealth Inequality

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It strikes me that the standard response to almost every social problem by those on the left is “tax it”. With the debate over the sugar tax having taken place this week, I think it is fair to say that despite what many have been saying, that the government’s plans to tackle obesity don’t go far enough, it’s actually more the case that they are taking action in completely the wrong areas.

Taxation shouldn’t be taxing

Tax does not have to be, and should never be taxing. All a sugar tax will do is drive up the price of many cheap foodstuffs for already struggling families. Now – this does not solve the problem of obesity, in fact, it could be said that no action encourages those on low incomes to be overweight, but I would argue that it is not tax which should be used to change people’s attitudes.

Tax is, fundamentally, an authoritarian institution. It is, as many have pointed out before me, state-sanctioned theft. But taxation is necessary, and it has its place – it’s one of the ways the government obtains its money so that it can pay for the projects which it undertakes. The problem I have with the way taxation is used in this country is that it far too often is used to hit the poorest the hardest. Those with large amounts of wealth and who live the high life at others’ expense can afford to pay tax, but many thousands of others struggle to get by, and pointless social programmes such as these only hurt them more. I’m sorry Jamie Oliver, but I’m afraid I think your campaign is dangerous and damaging.

Taxing sugar will cost jobs

Taxing sugar will lead to job losses; a report by Oxford Economics revealed that 4,000 jobs are at stake, since a tax will significantly increase the operating costs of firms selling soft drinks. A similar tax in Mexico led to 3000 job losses, so this sort of nanny state virtue signalling only leads to long-term economic damage. Again, it is the working-class people in these jobs who will be hit hardest. Also, taxing sugary drinks is completely irrelevant – the tax does not apply to milk-based drinks, so you could still walk into your favourite café, buy a chocolate milkshake or strawberry frappuccino and fear not – the 15 tablespoons of sugar in those are still available to you, tax free! Finally, despite what I said earlier about tax bringing in revenue for the government, certain types of taxation – such as those on consumer goods – actually cost money. £520 million per annum will be made from the tax, but it could potentially lead to inflated prices, and an increased cost of borrowing. There is certainly the potential that this tax may cause more harm than good.

Obesity is a blight, but taxing won’t work

I do not deny that obesity is a serious blight on individuals’ health, but this tax will not solve the problem. It is not pragmatic, it is not useful, it is entirely for show and it will only result in more economic pain. We should tackle obesity, but where it matters – in individual habits and mindsets. Ultimately it is down to individuals to make a conscious change to their diet and exercise habits, and we can help that through education and awareness. Perhaps to start with we should try to help the poorest in our society rise to better standards of living so they can actually afford food which is healthier for them, which remains hideously expensive for the struggling low-wage worker trying to manage his money. Another alternative is trade – getting cheaper, healthy foods imported from other countries to create a supply surplus, and thus lowering the price of food. It may not seem to be an option loyal to our own national agriculture, but it is another option.

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Economic inequality is  big talking point in politics

Economic or “wealth” inequality is often talked about by those in politics these days. It is indeed a very serious issue, with the wealth gap being wider than every before, not just in Britain, but across the world. In fact, the top 0.1% of the world’s population controls 99% of the world’s wealth… make of that what you will. But what is causing this? I shall name just a few examples:

  • First of all, large companies and rich individuals are able to exploit loopholes in complicated and extensive tax codes. People from poorer incomes cannot afford the lawyers and researchers to enjoy the benefits of these loopholes, and so the richer you are, the less tax you pay. A simpler tax code would reduce this particular inequality.
  • We also have an extensive system of government subsidies, which creates lobbying groups, special interest groups, and is very hard to take away once it is being paid. One prime example of this is the railways franchising system – where private companies, rather than operating to make a profit, take government subsidies in return for providing sub-standard services.
  • The Bank of England, along with other powerful central banks such as the Federal Reserve pursue a policy of Quantitative Easing, i.e. printing (though these days it is often done electronically) money. This debt-based monetary system creates a ludicrous cycle where banks effectively have the power to create money when they lend. If you own the assets you benefit – if you don’t, you get left behind. Effectively, it’s another huge subsidy, only this time on economy-altering levels.
  • Finally – income tax. The only way many people can narrow the gap between themselves and the rich is by working, but governments frequently tax labour as a commodity – i.e. taking a cut from people’s wages – income tax! Meanwhile, non-labour based wealth such as land ownership, asset management and corporations is taxed a much lower rates. This keeps those at the bottom firmly down, whilst those at the top reap the benefits. Income tax should not be the main source of government income – perhaps tax something like land instead!

Economic policy today is about maintaining wealth inequality

These are just a few of the causes of income inequality in the UK today. Where did I learn all of this from? Basic classical economics. One need only research the classical liberal schools of economic thought – on which modern economics is founded – to realise that economic policies pursued today are purely for the sake of 1.) wealth extraction and 2.) maintaining wealth inequality. The wrong parts of society are consistently taxed, and those at the top are consistently handed the means to maintain their social status through state-funded monopoly and subsidy.

For anyone who is interested in learning about this more, I can recommend any of the books written by classical liberal economic thinkers. Specifically good authors are: Adam Smith, Frederic Bastiat, Alexis de Tocqueville and David Ricardo. The Mises Institute, Adam Smith Institute and Liberty Fund are all good places to start.

If you want any more information on how the current system of debt-based currency is destructive, I can recommend Michael Maloney’s series “The Hidden Secrets of Money”.

Image result for Adam Smith
Meanwhile, Adam Smith paces his office. A man whispers in his ear: “tax”. He responds: “Shame!”

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