Unhealthy Subsidies: How Much Do Taxpayers Contribute to Promote Disease?

Health taxes are a well-known fiscal measure for discouraging consumption of unhealthy products like tobacco, alcohol, and sugary beverages. Less well known are opportunities to eliminate government subsidies. This paper is an inquiry into subsidies for tobacco, alcohol, and sugary beverages, products that are particularly harmful to health and, as Adam Smith noted in 1776, “which are nowhere necessaries of life.”

This paper estimates the revenues that could be saved by eliminating two types of subsidies for these products: budgetary transfers to farmers and forgone revenues from the tax deductibility of promotional spending. According to the agricultural subsidy database of the Organisation for Economic Co-operation and Development (OECD), government transfers to tobacco, alcohol, and sugar producers in 2022 amounted to less than US$10 billion worldwide. In 2023, forgone revenue from nine of the largest manufacturers of cigarettes, alcoholic beverages, and sugary beverages was about US$16.2 billion (about 20 percent of the US$85 billion these companies spent on product promotion). China is the one country confirmed to have a policy that does not allow tobacco manufacturers to deduct promotional spending as a business expense. This policy has led to increased revenues and indirectly discouraged smoking and its ill health effects.

By contrast, other unhealthy subsidies are much larger. Some US$510 billion of taxpayer money promotes cultivation of vegetable oils and cereal crops—much of them used to produce ultraprocessed foods that contribute to noncommunicable disease. Fossil fuel subsidies, which harm health in many ways, are about US$1.3 trillion annually.

Regardless of the scale, any existing taxpayer-supported subsidies for unhealthy products provide countries with a clear opportunity to save money and improve health. Identifying and eliminating such subsidies is a win for increased fiscal capacity and a win for better, longer lives.