by Christopher Snowdon, Head of Lifestyle Economics at the Institute of Economic Affairs
Meat-tax: a good idea or not? Argument against a meat tax
Towards the end of last year, following the release of key reports on climate change, the topic of a tax on red meat became prominent in the headlines. Christopher Snowdon, Head of Lifestyle Economics at the Institute of Economic Affairs, has written a piece arguing against the idea of a meat tax, from an economic viewpoint rather than for vegetarian reasons. In a future post, we will be covering the counter argument.
Economists are comfortable with raising prices through taxation when consumption imposes costs on other people. Known as Pigouvian taxes, they are based on calculating the negative externalities of consumption and raising the price by the same amount so that the end-user takes the full costs into consideration. For example, if a product costs £2 to buy but creates the equivalent of £1 of pollution, the product should be priced at £3.
The idea is not to reduce consumption per se (although that is likely to be the effect), but to make consumers internalise the full costs of their behaviour, thereby creating a socially optimal level of consumption. Meat has recently been suggested as a suitable case for treatment. Its consumption is said to create various health costs and its production is said to create all sorts of environmental costs.
Pigouvian taxation provides a neat theoretical way of addressing unwelcome side effects, but although campaigners and politicians sometimes refer to the principle, such taxes are rarely used in practice. Taxes on sugary drinks and tobacco, for example, do not really attempt to match the rate of tax to the quantity of external costs. They are revenue-raising ‘sin taxes’.
The problem is that it can be extremely difficult to put a figure on external costs, or even to establish whether such cost exists. In the case of smoking, it seems obvious that costs are imposed on other people because taxpayers pay for the treatment of smoking-related diseases. But taxpayers also pay for the treatment of diseases which smokers are less likely to develop and they pay for pensions which smokers are less likely to claim. Economic evidence suggests that smoking is cost-saving when you look at government spending in the round. Strictly speaking, it should be subject to a reverse Pigouvian tax, ie. a subsidy.
The evidence is less clear in the case of meat-eating. Claims about health costs are usually one-sided, predictions about the future cost of climate change are inherently uncertain and estimates about the role of agriculture and animal farming in contributing to either of them vary greatly.
For example, a study published last year claimed that processed meat and red meat kills 2.4 million people a year worldwide. This is more than twice the estimate published in The Lancet in 2010 and more than three times the estimate published in the same journal in 2013. In the UK alone, the authors suggested that meat is responsible for 70,000 deaths per year, which would make it the single biggest cause of death after smoking. There are serious doubts over whether such estimates, which are usually accompanied by policy suggestions, are credible.
It could be said that this is an argument about detail rather than principle. If eating meat imposes a cost on people and the planet, should it not be taxed? Perhaps, but every form of consumption – including vegetable farming – creates externalities of some sort and has an environmental impact. It would be fiddly in the extreme to build a bespoke system of taxes and subsidies around them all. In terms of climate change, a carbon tax makes more sense than a meat tax.
Taxing meat would create its own costs, most obviously by pushing up the cost of living. Alternative sources of protein are often more expensive than meat and most people would not significantly change their diet unless the tax was set at an unfeasibly high rate. The poor would be hit particularly hard. Given the uncertainty of the benefits and the certainty of harm, it would be unwise to embrace a meat tax just yet.
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