Fat Tax

A fat tax is a surcharge placed upon fattening foods, beverages, or individuals. As an example of Pigovian taxation (a tax levied on a market activity that generates negative externalities), a fat tax aims to discourage unhealthy diets and offset the economic costs of obesity. A related idea is to tax foods that are linked to increased risk of coronary heart disease. Numerous studies suggest that as the price of a food decreases, individuals gets fatter. In fact, eating behavior may be more responsive to price increases than to nutritional education. Estimates suggest that a 1 cent per ounce tax on sugar-sweetened beverages may reduce the consumption of those beverages by 25%.

However, there is also evidence that obese individuals are less responsive to changes in the price of food than normal-weight individuals. To implement a fat tax, it is necessary to specify which food and beverage products will be targeted. This must be done with care, because a carelessly chosen food tax can have surprising and perverse effects. For instance, consumption patterns suggest that taxing saturated fat would induce consumers to increase their salt intake, thereby putting themselves at greater risk for cardiovascular related death. Taxation of sodium has been proposed as a way of reducing salt intake and the resulting health problems.

Since the poor spend a greater proportion of their income on food, a fat tax might be regressive. Taxing foods that provide primarily calories, with little other nutritional value reduces this problem, since calories are readily available from many sources in diet of industrialized nations. To make a fat tax less burdensome for the poor, proponents recommend earmarking the revenues to subsidize healthy foods and health education. Additionally, proponents have argued that the fat tax is less regressive to the extent that it lowers medical expenditures and expenditures on the targeted foods among the poor.

Indeed, there is a higher incidence of diet-related illnesses among the poor than in the general population. Unlike placing restrictions on foods or ingredients, a fat tax would not limit consumer choice, only change relative prices. In 1942 U.S. physiologist A. J. Carlson suggested levying a fee on each pound of overweight, both to counter an ‘injurious luxury’ and to make more food available for the war effort. The concept was reintroduced briefly in the late seventies, but became well known in the early 1980s by Kelly D. Brownell, director of the Rudd Center for Food Policy and Obesity at Yale. Brownell proposed that revenue from junk-food taxes be used to subsidize more healthful foods and fund nutrition campaigns.

In a 1994 Op-Ed in the ‘New York Times,’ Brownell noted that food costs were out of balance, with healthy foods costing more than unhealthy ones. The piece elicited controversy and outrage nationwide. Brownell became the focal point of this controversy, especially from Rush Limbaugh, who spoke out adamantly against the tax and the general principle of governmental intrusion into food choices and a possible invasion of privacy. This argument holds true for all taxation, including taxes on fuel, tobacco, alcohol and earned income. In 2003, The World Health Organization proposed that nations consider taxing junk foods to encourage people to make healthier food choices. According to the WHO report, ‘Several countries use fiscal measures to promote availability of and access to certain foods; others use taxes to increase or decrease consumption of food; and some use public funds and subsidies to promote access among poor communities to recreational and sporting facilities.’

Bruce Silverglade, director of legal affairs for the Center for Science in the Public Interest, said his nonprofit nutrition advocacy organization welcomed the recommendations and has spent years fighting for measures like a Junk Food Tax. The proposal got more traction when New York Assemblyman Felix Ortiz proposed taxes on junk food and entertainment contributing to sedentary lifestyles to fund nutrition and exercise programs. It should also be remembered that taxing foodstuffs is not an argument for increasing taxation. Other taxes can be reduced commensurately it the overall objective is to keep the tax take neutral. The fat tax is an argument for raising taxes on activities that we prefer to discourage (consumption of certain foodstuffs) rather than raising taxes on socially desirable activities. Therefore opponents of this type of taxation must identify which taxes are preferable to taxing these foodstuffs.

Other advocates of the tax point to the effect taxes have had on alcohol and tobacco use. Five studies published between 1981 and 1998 found that drinking declined as the price of alcohol increased. The same holds for tobacco. In California in 1988, Proposition 99 increased the state tax by 25 cents per cigarette pack and allocated a minimum of 20% of revenue to fund anti-tobacco education. From 1988 to 1993, the state saw tobacco use decline by 27% (triple the U.S. average).

Japan implemented a measurement of waist sizes during 2008 to help avoid the obesity epidemic confronting the United States. The ‘New York Times’ wrote: ‘To reach its goals of shrinking the overweight population by 10 percent over the next four years and 25 percent over the next seven years, the government will impose financial penalties on companies and local governments that fail to meet specific targets. The country’s Ministry of Health argues that the campaign will keep the spread of diseases like diabetes and strokes in check.’ The average male waist size in Japan is smaller than the average in the US. In 2011, Denmark introduced a fat tax on butter, milk, cheese, pizza, meat, oil, and processed food if the item contains more than 2.3% saturated fat. Also that year, British prime minister David Cameron told reporters that his government might introduce a FAT tax as part of the solution to Britain’s obesity problem.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.