Junk food taxes are gaining weight: Paternalistic move, Nudge or Tax Thirst?

June 27, 2011 12:00 AM
‘Sin taxes’ are gaining weight across the world. After duties on tobacco, alcohol and gambling, it seems that time has come for a junk-food tax.


An increasing number of countries across the industrialized world are considering alleviating the obesity epidemic by levying taxes on junk food. A junk food or fat tax may be defined as a tax or surcharge that is placed upon fattening foods, beverages or individuals with the aim to decrease consumption of foods that are linked to obesity. This is not an entirely new idea. Some economists, starting with Arthur Pigou, a 20th-century English economist, have long presented the arguments for imposing special taxes on goods and services whose prices do not reflect the true social cost of their consumption. Examples of Pigouvian taxes are duties on cigarettes, alcohol, gambling and also on environmental emissions. Support for another such tax, on junk food, is now spreading.
The Rationale
The rationale of a junk-food tax seems clear. We make the ‘bad’ foods more expensive, the ‘good’ foods less expensive, and people will probably shift at least some of their purchases to those healthier options. Fattening foods tend to be cheap (for an explanation of why junk food are cheaper than healthier alternatives, see The Omnivore's Dilemma by Michael Pollan), and fresh produce and meat are often the priciest. A tax could help offset that imbalance, nudging people to eat more of what they should and less of what they shouldn't.
Tax Food Initiatives
Calls for introducing tax junk food taxes are becoming more and more frequent across the industrialised world. Countries where these proposals seem to find some fertile grounds are CanadaAustralia, and, within the US, California and Nevada. In Europe, Denmark has been the first mover by introducing a tax on foods high in sugar and fat in 2010. Now, Hungary and the UK seem the next to embrace such an innovative, yet controversial , policy tool. While studies show that eating behavior may be more responsive to price increases than to nutritional education, there is also evidence that obese individuals are less responsive to changes in the price of food than normal-weight individuals. Indeed, a junk-food tax may have less impact than its advocates expect. Some studies on the effect of cigarette and alcohol sin taxes suggest heavy users are less influenced by price changes than others, so that a fat tax may do little to improve health, at least for today’s junk-food addicts.This seems to suggest that fat taxes are more likely to prevent obesity than to tackle it.
The science of junk food taxes
But would a fat tax affect behaviour?
Advocates of the tax usually point to the positive effect taxes have had on alcohol andtobacco use. Scientific research shows that taxing soft drinks and pizza can decrease the amount of calories that people consume from these foods. Cross-sectional, prospective, and experimental studies have found an association between obesity and the consumption of sugar-sweetened drinks. However, experimental studies have not always found an association, and the size of the effect can be very modest. There's even evidence that such taxes can have the perverse effect of increasing consumption of fatty or salty foods. A full list of sources on fat taxes is avaialble here.
Distributive justice
Fat taxes are also questioned on distributive justice’s grounds. Since the poor spend a greater proportion of their income on food, there is a risk that a junk food tax may be regressive. However, 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.vMoreover, proponents generally argue that the fat tax may be less regressive to the extent that it lowers medical expenditures among the poor. This seems to be true insofar as there is a higher incidence of diet-related illnesses among the poor than in the general population.
Public perception
The notion is catching on with the general public, however. A February 2010 poll by Quinnipiac University found that New York residents overwhelmingly favor a soft drink tax, with 76 percent wanting the tax, and 22 percent opposing it. The poll found both Republicans and Democrats favor the tax. However, a CBS News poll from January 2010 reported that a tax on items such as soft drinks and foods considered to be junk food, is opposed 60% to 38%. An even larger number, 72% of Americans, also believed that a tax would not actually help people lose weight.
Nudge, slippery slope or fiscal thirst?
Unlike placing restrictions on foods or ingredients, a fat tax would not limit consumer choice, only change relative prices. Yet, unlike smoking, or excessive gambling and drinking, eating junk food does not directly impair the well-being of anyone else. This seems to reduce the case for the introduction of fat taxes and makes it even more controversial, according to many. As a result, a more direct, yet contentious, approach would simply be to tax people on the basis of their weight. 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 U.S.
This experimental policy deserves close scrutiny and, by limiting individual choice, has reduced chances to qualify as a ‘nudge’.
As argued by The Economist in tempore non suspecto, « Like the foods they aim at, fat taxes look appetising but can have nasty effects ».
Open questions
What do you think?  Would a tax on junk food change your eating habits?  Do you believe that a junk food tax is an appropriate response to the obesity epidemic?  A similar tax is a paternalistic move, a nudge or a way to collect precious resources at times of fiscal austerity ? 





Subscribe to our newsletter and receive all our updates directly in your inbox.