Governments Continue Tax Breaks for Junk Foods and Over-packaging

Most people think of food as tax-free, but it’s not. The issue is not so much the absence of taxes on food, but the lack of purpose behind them.  The general public calls such levies tax grabs. Among fans of smart public policy, they’re called dumb taxes.

The federal government, with which most provinces will soon harmonize, already collects over two billion a year in GST levied at supermarkets and groceries, not to mention the billions more collected from restaurants and take-outs. When Ontario and federal taxes are harmonized this summer, the province will give up its chance to control legislative independence to use taxes as incentives for producers, retailers or buyers of food to make healthier or more environmentally responsible choices. It’s an example of what happens when governments don’t think intentionally about food, and how to use measures that seem unrelated to food, such as taxes, to create a win for healthier food.

To get a sense of how taxes work, I went shopping at a downtown supermarket with my eyes peeled to foods that do or don’t carry a charge for the GST, the tax that provinces will soon harmonize us to.  I couldn’t find any logic, consistency or public benefit in the way the tax is either levied or not levied.

Lack of logic becomes understandable to anyone who reads the Canadian (or the near-identical U.S.) federal government’s definition of food: “any article manufactured, sold or represented for use as food or drink for human beings, chewing gum and any ingredient that may be mixed with food for any purpose whatever.” This is not a definition that guides intelligent food policy of any kind, let alone tax policy.

My first stop was at the fresh produce section, for the obvious reason that this is front and centre in all supermarkets and groceries. This placement gives an impression that we’re entering a bright, colorful and healthy place. As with drugstores, the bad stuff that makes the money – and that might lead to the retailers being branded as junk and cosmetic shops instead of healthy places — is a little removed from center stage.

The absence of food taxes on most fresh produce reinforces the same false impression – that taxes have been forgiven because the store is selling basic necessities of life and health, not just using them as camouflage for junk sales.

But harmony does not reign, even in the produce section. To justify the time I was spending in the store, walking the aisles with my healthy food expert friend Brian Cook who called out prices and taxes for me to write down, I carted around my purchase of fresh- cut fruit in a clear plastic container. The plastic container is essential to protect the food from germs, and contains no more plastic than the plastic wrap around a bag of apples or oranges.

But cut fruit at a supermarket comes with a GST, increasing the cost of a serving’s worth of fruit snack, which smart tax policy should try to encourage, by about ten cents — just enough to equal the price of an unhealthy quick snack.

Right beside the fresh produce — which caters to the nostalgic notion that groceries are bought to prepare and serve in the home kitchen, rather than unpacked and eaten in the car or the TV room – is the prepared food section. Modern supermarkets are about selling “solutions to meals,” as the industry saying goes, not the ingredients of meals. So the prime space given over to the grab-and-run-heat-and-eat section testifies to that.

If I want a good deal, with more calories and less tax for the dollar, I should buy the individual pizza slice, which like any heat and eat or bulk nut-with-candy item under four dollars, is and will remain untaxed.

And if I have an impulse to top off the relatively humdrum pre-fab meal with a round of treats for the kids, a tax-free six pack of donuts is – the product placement gods miraculously anticipated my anxiety and set them up right there in that section — conveniently at hand. Buying six or more donuts wins a tax holiday. Any stereotype that leaving taxes off many food items helps people on low incomes afford healthy essentials turns out to be to be a big fat lie. I can even use a single can of pop as a chaser – no distinction here between calorie-laden or pure soda pop with no sugar – which is and will remain tax-free, unlike a large container of pop or juice.

Similarly arbitrary decisions govern the rest of the store. White bread, which has been stripped of most natural nutrients found in grains and is wrapped for long shelf-life in hard-to-recycle plastic, is tax-free. That puts a competitive price disadvantage on makers of breads from whole grains, which are more expensive because real ingredients are more challenging to mass produce and preserve, and which are often wrapped in brown paper bags that are easy to recycle or compost. Their fiber-rich innards and compostable package get no tax break to thank buyers for government savings on healthcare and garbage collection.

The same tax indifference to sugar, fiber, nutrient content and packaging applies to the gigantic cereal aisle, which might more truthfully be labeled the children’s morning dessert aisle. There is no tax break for makers or buyers of healthy, unprocessed cereal grains. Buyers of sugar-based cereals marketed as fruit loops or chocolate lucky charms eat forbidden treats with forgiven taxes. The same goes for peanut butter—no break for people who make or buy peanut butter as distinct from smashed peanuts adulterated with cheap fillings and sweet nothings.

The Canadian Medical Association, along with the Centre for Science in the Public Interest, lobbies for using taxes to encourage food manufacturers and shoppers who favor healthful foods. They argue that such taxes, which have already been tested successfully on tobacco, can influence people toward wise choices that can save over six billion dollars a year lost in the treatment of chronic diet-related diseases.  By harmonizing taxes on a wholesale basis, the province gives up this policy tool.

Interestingly, there has been almost no public debate on this aspect of the HST, from conservative tax-haters or the left-tilting Canadian Centre for Policy Alternatives, which writes favorably on the HST in terms of its impact on income redistribution; obesity distribution is apparently not a class issue for old lefties.

If anyone needed confirmation of the deep power of the junkfood boor-geoisie to determine public policy by keeping issues off the agenda, the deafening silence on a passed-up opportunity to give a tax break to healthier and more environmentally-friendly foods is it.

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