How Sugar Subsidies Increase The Cost Of Trick-Or-Treating

Justin Sykes Analyst, Americans for Tax Reform
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This Halloween millions of costumed children and nostalgia-filled parents will once again take to the streets in the annual ritual of trick-or-treating. While kids look forward to dragging home a haul of candy the size of body bag at the end of the night, what most don’t realize is there is a lot more that goes into the cost of those mini Snickers and Baby Ruth’s than just chocolate and caramel.

In fact for years the price of candy in the U.S. has been compromised by crony capitalistic practices that line the pockets of the sugar industry at the expense of American taxpayers and consumers. Currently the Federal Sugar Program imposes price supports, production and import limits, and a grab bag of sweetheart deals that cater strictly to “Big Sugar.”

As alarming as these protectionist policies are, the economic impacts are even worse. These massive handouts to the sugar industry are responsible for increasing the cost of consumer goods such as candy, wasting hundreds of millions of taxpayer dollars, and killing thousands of jobs annually.

As currently written, the Federal Sugar Program sets a minimum price for U.S. sugar and imposes a limit on the amount of sugar U.S. processors are allowed to sell. The Sugar Program also sets import quotas for sugar, which limit the amount of sugar that can be imported to the U.S. As a result, these policies limit competition in the market and keep the price Americans pay for sugar in the U.S. artificially high.

In fact the average wholesale price of U.S. domestic sugar is more than twice that of the average world price. For instance in August of 2015, U.S. sugar was priced at 33.13 cents per pound, while the world price was only 15.57 cents per pound. It is estimated the Sugar Program cost consumers and food manufacturers well over $3 billion annually. This means U.S. consumers and food manufacturers are being forced to pay higher prices for sugar and related goods for no other reason than the governments desire to appease special interests.

The Federal Sugar Program also imposes the “Feedstock Flexibility Program,” which requires that in times of surplus the government must buy any excess sugar and re-sell it to ethanol plants at a loss. When the Feedstock Program took effect in 2013, the Sugar Program’s costs to taxpayers rose to almost $300 million for the year. In addition to the $300 million jump in taxpayer costs in 2013, the Congressional Budget Office (CBO) forecasts the Sugar Program will cost taxpayers another $163 million between 2016 and 2025.

Sugar subsidies have also had a profound impact on the U.S. job market. A study by the U.S. Department of Commerce (DOC) found that for every sugar-growing job saved through artificially high sugar prices, approximately three manufacturing jobs are lost. The DOC further showed that the Sugar Program contributes to an average of roughly 10,000 jobs being lost annually in the U.S. food industry.

Given such drastic economic consequences one would expect these Big Sugar handouts to result in some form of benefit to American consumers. However the not-so-sweet truth is the U.S. Sugar Program is artificially raising the price of U.S. sugar, costing taxpayers hundreds of millions dollars, and destroying jobs while offering absolutely no benefit to anyone but the sugar industry. For taxpayers and consumers alike, the U.S. Sugar Program is quite literally all cost and no benefit.