Junk Food Tax
Tackling the Obesity Problem through Taxation
Arthur Pigou (1877-1959) was an English economist whose work gave rise to so-called “sin taxes.” The Concise Encyclopedia of Economics notes that Pigou “developed Alfred Marshall’s concept of externalities, costs imposed or benefits conferred on others that are not taken into account by the person taking the action.”
He said that a company creating pollution should pay a tax to cover the health cost to society of the activity. On the other hand, people educating themselves should be subsidized as they are creating a benefit to society.
Taxes levied to compensate society for some sort of negative behaviour are called Pigouvian taxes. The health costs of tobacco and alcohol addiction are, to some extent, covered by the taxes raised on these items. Gambling is taxed in many jurisdictions because addiction can lead to family breakdown.
Support Grows for Junk Food Tax
According to The Economist (August 1, 2009) “Support for another such (Pigouvian) tax, on junk food, is now spreading, especially in America. Congress is considering a tax on sugary drinks to help pay for the planned expansion of health-care coverage.”
The Urban Institute, a Washington think-tank, has issued a report advocating for a junk food tax to help deal with the obesity problem in the United States. In its July 28, 2009 study entitled “Ousting Obesity: Strategies from the Tobacco Wars” the Institute writes that, “If recent trends continue, more than 40 percent of Americans will be obese within the next 10 years, and for the first time in the nation’s history, life expectancy will decline rather than grow.”
The group says obesity is the cause of more than 100,000 preventable deaths each year and costs the health care system $200 billion annually. The Urban Institute suggests a tax of ten percent on “fattening food of little nutritional value” would raise $530 billion over ten years.
Cost of Obesity Shared by Everyone
The Economist’s report states that, “Fat people are more prone to heart disease, diabetes, bone disorders, and cancer. An obese person’s annual medical costs are more than $700 greater than those of a comparable thin person.”
However, in a country such as Canada, where health care is funded by government from taxes paid by everyone, those of a healthy weight must cover the extra medical treatment given to those whose poor diet causes weight gain.
With private, employer-sponsored health plans, premiums are the same for the slim and the heavy.
Junk Food Definition
Such a tax would inevitably create howls of protest from the food industry, and the first hurdle to be jumped would be defining what foods should attract a tax.
Some items are obvious: sugary pop is of little nutritional value and would be taxed, while lettuce, tomatoes, and green onions would escape. But, what happens when you put dollops of salad dressing on those veggies? Hamburgers contain protein along with the artery-clogging fat. How can a fair tax be levied here?
So, a huge bureaucracy might be needed to decide which foods should be taxed and at what rate. An equally large food industry lobby would likely be created to fight for decisions favouring certain product lines.
Junk Food Tax may have Negative Effect
Numerous studies, including one by National Bureau of Economic Research (June 2009) have shown that food price increases take a long time to affect weight, but very slowly.
The authors write, “that policies raising the price of calories will have little effect on weight in the short term, but might curb the rate of weight growth and achieve weight reduction over a very long period of time.” The time scale here is 30 years.
Also, raising the price of certain foods through taxes might work against engaging in healthy exercise. A paper published in The Journal of Public Economics in June 2009 suggests higher fast-food prices will cause people to switch to buying raw ingredients and cooking more meals at home. Surely, that’s a good thing. Maybe not, say the paper’s authors. Home food preparation takes more time and therefore leaves less time for exercise, which is a vital component of the battle against obesity.
A Candidate for Taxation?
|
What do you think about this article?
More in Health & Wellness
Latest Articles