Pros and Cons of Fat Tax

Me eating chocolate cake in Turkey. Should it be taxed?

A fat tax is a specific tax placed on foods considered to be unhealthy and contribute towards obesity. The tax could be placed on foods high in sugar / fat, such as crisps, chocolate and deep fried takeaways.

It would be similar in principle to a cigarette or alcohol tax.

Pros of a Fat Tax

  1. A Fat tax would make people pay social cost of unhealthy food.  Consumption of Fatty foods have external costs on society. For example, eating unhealthy foods contributes to the problem of obesity. Obesity is estimated to cost the UK economy around £6.6–7.4 billion a year. (Blackwell-Synergy) . These costs are due to
    1. NHS costs of treating disease related to obesity, such as heart disease, angina, diabetes, strokes.
    2. Time lost at work due to obesity issues.
    3. Lost earnings from obesity related disease and premature death.
    4. Those who are obese are 25% less likely to be in employment, leading to lower tax revenue and higher welfare spending on benefits.A tax on fatty foods would make people pay the social cost of these foods. Increasing the cost of unhealthy foods, would reduce demand and play a role in reducing obesity levels. Making people pay social cost would achieve a more efficient allocation of resources. (see theory of tax on negative externality)
  2. Encourage Healthier Diet. A tax on unhealthy foods would encourage people to choose healthier foods which lead to improved health and would help reduce related disease. A fat tax would also encourage producers to supply foods lower in fat and sugar. Fast food outlets would have an incentive to provide a wider range of foods.
  3. Raise Revenue. Through increasing tax on fatty foods, the government could raise substantial sums of money. They could use this revenue to offset other taxes – such as decrease the basic rate of VAT. Therefore, a fat tax could be revenue neutral (no overall increase in tax revenue).
  4. Equity Neutral. Also a fat tax could be equity neutral. Some may say a fat tax is regressive (takes a higher % of income from low income families), but if other regressive taxes are reduced the overall impact on equality should be unchanged.

Cons of Fat Tax

  1. Difficult to know which foods deserve a fat tax. e.g. cheese has high fat content.  Many foods could contribute to obesity if consumed in sufficient quantities.
  2. Obesity is caused by more factors than just over-consumption of ‘high fat’ high sugar foods. It includes issues such as size of portions, levels of exercise and genetic factors.
  3. Administration costs in collecting tax from unhealthy foods.
  4. Likely to be regressive. Often people on low-incomes spend a high % of their income on ‘unhealthy foods’.
  5. Costs of obesity may be over-estimated. Obese people have lower life expectancy and so save government pension costs and health care costs in old age.

Related

4 Responses to Pros and Cons of Fat Tax

  1. Jack and Laura May 2, 2012 at 2:49 pm #

    In my opinion i think it would be a terrible idea to tax food and drinks as this affects the country overall. For instant people who are not over weight will also have to pay these taxes and most people are in poverty. furthermore this would be unfair to the overall community as britain has around 23% of obese people out of the other countries.

  2. curt February 3, 2013 at 4:00 pm #

    A fat tax sounds very wrong and I found myself joining in to complain about it. But on further thoughts and seeing all the health problems resulting from obesity, I would think it’s the most logical thing to do. Why should the tax payers support those who wish to enjoy their food rather than control their diet for good health.

  3. Doug June 28, 2013 at 11:19 am #

    “Obese people have lower life expectancy and so save government pension costs and health care costs in old age.”

    Not sure the evidence bears this out.

    Fat people tend to have a similar life expectancy to healthy weight people, but have less healthy lives, and hence are a burden on healthcare for longer.
    http://bmjopen.bmj.com/content/2/3/e000940.full

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