Could a ‘fat tax’ help the economy?

Mark Bittman wrote an interesting article for the New York Times this week suggesting that we “turn the tables” on food subsidies and start taxing unhealthful junk foods. The idea is that the taxes would bring millions of dollars into the economy while at the same time reducing America’s staggering health care bill.

“A 20 percent increase in the price of sugary drinks nationally could result in about a 20 percent decrease in consumption, which in the next decade could prevent 1.5 million Americans from becoming obese and 400,000 cases of diabetes, saving about $30 billion.”

Countries like Hungary are already beginning such a program.

Also worth a read is a semi-related article in which the Times takes a look at another study related to what kinds of calories we consume and how not all calories are equal.

I don’t want to go into too much detail because the articles (specifically Bittman’s) really are worth a read, but I’d like to hear what people’s thoughts are on the subject. Personally I think it’s a good idea to help make healthy foods more affordable and to help scale back rising obesity and associated healthcare costs (which are said to reach $344 billion in the next seven years). There really is no good reason why it’s cheaper to buy fruit loops than real fruit.



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11 responses to “Could a ‘fat tax’ help the economy?

  1. Nati

    It isn’t cheaper to buy Fruit Loops. People just make the decision to do so. We always had fruit in our house growing up and veggies at dinner. It was not the most nutritious upbringing, and of course we had sugar cereal, but those are the choices that were made.

    I think the government cowing people into doing things is a horrible idea. Some of the things we eat are cultural and some are easy choices, like packaged, processed food…and some are indeed healthy choices. But they’re choices none the less. 75% of America could be fat, I still would not listen to the government on this issue. Do not forget, they’re the ones who always get nutrition wrong!

    • I definitely agree they get the specifics of nutrition wrong a lot of times, but it’s pretty obvious why there’s an obesity problem in the United States. I don’t agree that it’s cheaper to buy healthful foods. I’ve seen how expensive they are compared to what I get here. Crap foods and fast food most certainly are cheaper, and if I wasn’t fortunate enough to be able to afford to shop at places like Whole Foods I’d be buying the same stuff. I used to when I was in college because that’s the cheapest and easiest route. I think it’s a combination of both, because it’s also true that a lot of people don’t know how to cook or simply don’t have the time to cook.

  2. The idea of jacking up prices to lower consumption works fine on paper, but not so hot in practice. We in Hong Kong have such a practice already, instigated by our government, and it doesn’t work. It only helps to jack up tax revenue from the vendors and manufacturers and also fuel inflation. I would strongly advise against that line of countermeasure.

    • I thought I read that it didn’t work in Denmark or something either. Maybe it will work better by making other foods cheaper?

      • No, it won’t make foods better or cheaper, and it’s Economics 101 (sorry, no offence meant, I didn’t mean you’re unwashed in economics or anything like that). It might make a small selection of foods (especially food inputs) better or cheaper in the short term only, but not in the long run. Higher taxes on food gets reflected in higher food prices, which is what makes the impact on the practical level for you and me. To cut a long story short, higher prices at the manufacturing level just gets passed on to the consumer, and there’s a domino effect on other goods – unintended consequences.

        For example, here in Hong Kong since 2010, our government raised the prices of tobacco by 41% (the highest duty in the world). For the anti-smoking lobby, that’s welcomed news. Fine. But if you live in a free economy (and Hong Kong is the freest in the world, to say nothing about also being the most capitalistic), price increase in one commodity (tobacco in our case) spills over into price increases for milk, eggs, junk food, popping candies and whatnot. Inflation is officially 5.5% p.a. as set by our government, but any Hong Kong Chinese accounting student (and most Chinese students are numerate to a high level) will tell you our inflation is running at closer to 8% or 9% p.a. Since we have absolutely no price control (because we’re a uber-capitalist economy), that level of inflation is seriously punishing.

        To date, what we have seen in the tobacco tax and the taxes for the other commodities have all gone into government coffers. Tobacco consumption remained at the same level as before (calculated even with several different adjustment modelling techniques). Other food-related commodities/goods remained consumed at the same levels as before. In other words, no change – just that tax revenues have shot up for the government.

        I don’t want to sound like Chamberlain back in the 1930s, but most countries like the USA and UK have never had it so good, what with some degree of price control and things.

        Indeed, your quotation above is in the usual vein in which the idea is presented. Just saying, you know.

        Like I said, the whole idea of ‘turning the tables’ sounds fine if we look on things as a standalone situation. Trouble is, everything else is hitched together. Now with the world looking set to go into another round of economic downspiral, tightening credit, rising unemployment and the same old, same old coming to rehaunt us since 2007/08, I would say ‘turning the tables’ is not sound practical economics.

        We have to be politically savvy about this as well. Is the government wanting us to eat better/healthier for the benefit of our health, or merely to save its healthcare budget? There IS a fine line between the two.

  3. I was reading a forum on moneysavingexpert where someone had declared she couldn’t afford to feed her children healthy food as it was twice as much as junk food and I’m sure this was not true. A lot is down to lack of knowledge on food and how to shop, even how to budget, how much of this is taught at school anymore, we did home economics but I have not heard it being taught anymore. The assistant serving me had to ask what my butternut squash and red cabbage were (she had lost her print out with pictures of them on). But as far as your question goes, it makes sense to raise prices but will it achieve much more than increased profits for the worst offenders and with rising food costs lately anyway it will make it even harder for people to switch to something that could also be completely alien to them.

    • I had “home economics” but I put it in quotes because it was a total joke. Food ended up on the ceiling, and it was nothing but a bunch of kids goofing off. I only know about many foods because I’ve read a lot of food blogs and have taken the time, so most of what I know has come from learning it myself. If a person isn’t interested in food I can totally understand how difficult it would be to buy anything that wasn’t already pre-made.

  4. I can’t even begin to put my thoughts into words right now, but as you know, I’m thoroughly interested in the topic. Thanks for posting the articles and giving me more food for thought:)

  5. austin kobs

    A fat tax is needed to help our slumping economy! With an annual bill of $147 billion, we need to pay for obesity realted healthcare costs somehow.

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