Mexico’s Peña administration reminds me a little of America’s second Bush administration: every time something good comes out of it they seem a little surprised and try to walk it back. For the Bush administration we have the examples of the Medicare Modernization Act of 2003 or the Energy Policy Act of 2005, both awesome ideas turned into dog’s breakfasts. (And later fixed, I should add.) For the Peña administration, we have the sugary soda tax. (Among other things.)
The Mexican congress passed the 10% tax on soda in 2013. Consumption crashed. Mexicans drank 163 liters of soda per year, 40% more than Americans. (Soda is one of the few products that Americans consume using the metric system, so I’ve left it in liters.)
There was some debate about the effect of the tax. Would producers pass it on or would they absorb it? If they passed it on, how would consumers respond to a relatively small price shift? After all, inflation in Mexico has been running at about 4% per year for a decade, so consumers might just shrug off a 10% increase in prices as part of the inflationary background noise.* Or they might just jones their Cokes filled with genuine cane sugar so much that they suck up the damage.
Well, we found out. Consumption went down 12%. Awesome sauce! Excellent! So you would think that the tax would now be raised to the 20%-30% level.
Nope. The Chamber of Deputies just voted to cut it back to 5%. That sound is my head hitting my desk for the second time in a week.
The bill went through on a vote of 423-33, but that doesn’t quite capture what happened. The soda tax cut was slipped into the overall revenue bill with no debate at all. Then a PRI-PAN alliance blocked any attempt to amend the legislation.
But I guess it is okay because the PAN minority leader, Marko Cortés, tells us that the tax cut will only apply to low-calorie soft drinks.
Man, this is awful. Vote PRD, I guess.
* This is the only non-emotional argument against raising the U.S. inflation target to 4-5% per year that I have ever understood.