Fat Tax: Why we should tax unhealthy foods

If a government could introduce a relatively painless way to prevent 3,000 lives being lost through terrorist action, do you think we would hesitate to introduce such a policy?

bigmacA report by the University of Nottingham and University of Oxford [1], claimed that introducing a tax on unhealthy foods would save, at least, 3,000 lives a year from heart disease. The authors also claim this is a conservative estimate, because it ignores the benefits from the reduced incidence of diabetes, strokes and other obesity related illnesses.

Yet, despite the real benefits promised, many politicians and consumers were quick to dismiss the idea. Is it really a good idea to introduce a fat tax, or do Big Macs deserve to remain cheap and free of extra tax?

Arguments for a Tax on Unhealthy Foods



1. Externalities of Unhealthy Foods.

Unhealthy eating has an impact on ourselves but also on the rest of society. Obesity related diseases cost the UK £3.4bn per year. [2] The cost of Obesity in the US is estimated at $75 bn.[3] If we choose to eat foods that make us unhealthy and obese, this creates external costs such as:
  1. Medical Costs – treating obesity.
  2. Lost productivity at Work e.g. Time off sick
  3. Premature death

Therefore, the government should collect sufficient tax from unhealthy foods to pay for the external costs that they create. It is the same principle as to why petrol and cigarettes are taxed; e.g. higher petrol tax is justified because petrol causes pollution.

The external cost of unhealthy food is not easy to calculate, but this is not a reason to avoid having a tax. The point is that at the moment society is effectively subsidising the consumption of unhealthy foods, and ultimately it is the taxpayer who has to pay for this.

2. Personal Cost of Obesity

Eating unhealthy foods increases the likelihood of obesity, early death, depression and a whole catalogue of related problems [4]. Higher prices would discourage people from consuming unhealthy foods. It may not stop people eating fatty foods completely, but this is not the aim. Reducing consumption of fatty and salty foods would have a significant benefit in improving health and personal well being.

3. It will save Lives

Currently, more than 216,000 people in the UK die from heart attacks and strokes each year [5]. Heart disease is the second most common cause of death. The report suggests that 3,000 lives per year could easily be saved in the UK. As well as saving lives, reducing obesity will also improve the quality of life.


Arguments against a Fat Tax



1. It is unfair to tax Fat people. It is discrimination.

This is not a tax on fat people. A government inspector is not going to go around with a weighing scale, dishing out tax penalties for people who tip over the scale. This is a tax on unhealthy foods, paid by everyone who chooses to consume them.

2. It's just another scheme to raise government revenue.

A tax on unhealthy foods should be revenue neutral. It is not about raising total tax revenue, it is about switching the tax burden. If the government raised £2 billion a year from such a tax, this tax could be used to subsidise healthy foods, pay for health care or reduce other types of tax.

3. It is a tax on the poor.

The argument is that those on low incomes are more likely to consume unhealthy foods, therefore, this tax will increase inequality. However, if a tax on fatty foods saves lives, we should not avoid implementing it just because it is the poor who will mostly benefit. If we are really concerned about the impact on equality, the revenue from a fat tax can be targeted to the benefit of the poor. An increase in inequality need not occur from a fat tax.

4. Nanny State.

  • Who is the government to tell people what to eat? If people want to eat salty and fatty foods then let them.
But, the whole point is people are still free to consume as much salty and fatty foods as they like. It is just that now they have to pay a fairer reflection of the true cost to society. If you got drunk and caused economic damage, has not the state a right to make you pay for the economic costs of your drunkenness? Similarly society has a right to make you pay for the economic cost of unhealthy food. As an additional benefit, you will probably live longer and feel happier.

5. It won't have any Effect.

  • Look at smoking; the government tax smoking, but people still smoke. Tax on petrol has not stopped people driving.
Demand maybe inelastic for fatty foods, but they will reduce consumption by a certain amount, and this is the intended effect. For example, a tax on an extra large Big Mac, may reduce consumption by 20%. Instead of eating 10 a week, some people may not only consume 8 a week. This reduction of 20% will have a big impact on improving health. The aim is not to stop people eating unhealthy foods, but reduce excessive consumption. In moderation fatty and salty foods do not cause a problem.


6. Obese people die early and save the government paying pensions.

In a perverse way, this is actually a good argument. Because people who eat unhealthy foods have a shorter life expectancy the government will pay out less state pensions. Therefore, this reduces the external cost of obesity and so lessens the justification for a tax based on externalities. However, in another way, the fact that people die early is hardly a powerful argument for not trying to stop it.



References:

[1] The study from the Queen's Medical Centre in Nottingham claims that taxing food containing lots of fat, salt and sugar would prevent more than 3,000 deaths a year from heart attacks and strokes. See Channel 4 report on Fat Tax

[2] Cost of obesity in the UK is £3.7 billion per year, according to a Government white paper on obesity. See report

[3] Cost of obesity in the US ($40 billion of this cost came from public taxes.)

[4] Link between Obesity and depression at Psychology Today

[5] British Heart Foundation

[6] BBC video on the Fat Tax


The author is this post particularly enjoys deep friend Mars Bars with extra salt.

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6 Comments:

Anonymous Anonymous said...

Once again, we choose to "treat" the symptoms rather than addressing the cure, to the profit of the government and the real "fat cats" -- the corporations who create these items and purposely make them as cheap and addictive as possible. What sweetens most "unhealthy" foods? Corn syrup -- the most over-subsidized crop in the US, the cheapest form of sweetener, and one of the sweetest and most addictive. Its introduction into almost every mass-produced, low-cost food item in our grocery stores is one of the primary reasons for the rise in childhood and adult obesity. Eat healthier, you say? Have you priced the cost of food in the supposedly-more-healthy "whole food" stores these days? These same corporations have made a secondary business catering to the well-to-do, who can afford to pay the premium for FDA-defined "organic" foods, meats and produce. You aren't making people healthier by imposing your fat tax...all you're doing is soothing your Politically Correct sensibilities by claiming it's a choice, while continuing to line the pockets of government and big business. If you truly cared about people's state of health and the cost to society, you'd lay the penalty where it belongs...with big business who make these products because they're cheaper, and with government who regulates food content and subsidizes the crops and practices that produce them.

January 2, 2009 3:31 AM  
Anonymous Anonymous said...

Do you think that because you tax fatty foods, that obese people will suddenly or even eventually eat healthy? Taxing cigarettes doesn't stop people from smoking. If they no longer eat fatty foods because of the tax, what will be their "next best" choice? Tofu? If you look at the definition of opportunity cost, you will see that we choose something because it is more attractive than the next best choice. The next best choice to fatty foods is something close to fatty foods. Government can't legislate these kinds of decisions. If you want to hit obese folks in the pocketbook and punish them for their decisions, give incentives for good health. Don't charge me the same premium for health insurance or lower my co-pay if I fit some criteria for good health.

February 3, 2009 2:20 AM  
Blogger Tejvan Pettinger said...

over time taxing cigarettes has shown to slowly reduce demand. Presumably fatty foods are not as addictive

February 3, 2009 7:52 AM  
Blogger Tejvan Pettinger said...

Also the tax burden would typically be split between producers and consumers.

February 3, 2009 7:52 AM  
Anonymous USD said...

Yes, they should as they cost us a lot of money in healthcare.

January 22, 2010 4:25 PM  
Anonymous Anonymous said...

There should NOT be a tax on junk food. Its not up to you or any bureaucrat to try to tax me in to buying "healthier" foods. If you do that, maybe there should be a tax for living in (i believe)LA, since a day there is like smoking a pack of cigarettes. The US wasn't founded to be a nanny state, but just one to give people the bare essentials to succeed in life. If you wanna tell me what I can and can't eat, you can buy my food for me.

February 27, 2010 6:03 PM  

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