Why "Fat Taxes" Won’t Work

Try to set aside any strong emotional reactions you might have to the following bluntly-phrased quote, and instead, let’s see what useful insights might be embedded here:

If we really wanted to curb fat through taxes, many economists would tell you, it would probably be more effective to tax fat people than fat food. Most fat-tax advocates are rightfully appalled by such a proposal, but I have yet to see a compelling reason why taxing fatty foods is any more righteous than taxing fatty folk. If obesity imposes an externality on others--as fat-tax advocates claim it does--then the only "fair" thing to do is to tax the source of the externality. The food police don't want to tax fat people, because it shifts responsibility from the "toxic food environment" to the individual. It's better to have an ominous-sounding enemy such as Big Food to blame than to look as if you're discriminating against overweight people.
--Jayson Lusk, from The Food Police: A Well-Fed Manifesto About the Politics of Your Plate

Readers, what's your take on the idea of a "fat tax"? Here at Casual Kitchen, we’re more and more finding ourselves generally against the idea of fat, sugar and soda taxes. One factor is our deep disappointment with the fallacious logic and base appeals to emotion used by key proponents arguing for these taxes. We're also hesitant to embrace the idea because of one very likely unintended consequence: We’d be giving our incredibly competent political system[TM] the power to decide what foods get blessed as “healthy” (and thus are not taxed) and what foods are deemed “unhealthy” (and thus are taxed). That’s just a gigantic can of worms that I'd rather not open.

I’m a much bigger supporter of clear labeling regulations so consumers can have maximum information to make empowered food choices.

However, in the quote above from The Food Police, author Jayson Lusk bluntly tackles the subject of obesity and food taxes in a way I hadn’t really considered before.

Here’s what I mean: We know that obesity creates various societal costs. But so-called fat taxes transfer the costs of obesity to everyone, including people who are not obese. We can certainly have a debate on whether sharing these costs is societally appropriate or not, but it is undeniably an upside-down transfer of responsibility.

But worse, consuming junk food, sugary food or soda is not a necessary condition for being overweight! One can be overweight on a extremely wide range of diets. Thus many obese people won’t be impacted by a tax at all, either economically or in terms of incentives to select foods our authorities deem “healthy.”

But these reasons mewl pitifully at the feet of the most compelling reason fat, sugar and soda taxes are a bad idea.

Remember the Tobacco Settlement? In the late 1990s there was a gigantic legal settlement among the states of the USA enacting enormous taxes on cigarettes. And at the time, it was clearly understood that these tax proceeds were to be used towards tobacco education and smoking cessation programs. Note that this is exactly the same model fat tax advocates propose when they talk about using fat, sugar or soda tax proceeds to help fight obesity.

Except, as Lusk cites,

"...only about 2 percent of the funds from the Tobacco Settlement, which were promised to fight smoking, actually went for that purpose. The states spent the rest to fix budget shortfalls."

Just to make sure: Where does this shocking 2% figure from? Is it some phony statistic spun by someone with an agenda? Did Big Food dream it up as part of a secret plan to kill fat taxes and protect profits? Nope, not even close. It's from data supplied by the United States Government's own General Accounting Office in a 2004 report.

We're talking a grand total of $206 billion (billion!) in total Tobacco Settlement tax revenues over 25 years. All that money, and hardly any of it went where it was actually supposed to go.* To me, this is the proverbial elephant in the room when it comes to considering fat, sugar and soda taxes. No one seems to want to talk about it, yet it's still standing right there.

By now it should be clear. Fat, sugar and soda taxes transfer obesity costs away from the people who actually produce those costs. And unless you’re a wide-eyed optimist, it’s also pretty clear that these tax revenues won’t go toward what we’re being told they’ll go toward.

Readers, what do you think? I want to know.

* A quick but necessary tangent: You can arrive at an even more depressing conclusion here if you carefully think it through: a state that depends on tobacco tax revenues to plug budget gaps (or worse yet, issues bonds backed by tobacco taxes, as many states did), twists its incentives in a truly perverse way: they now have a macabre need for people to keep smoking. They need the money!

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chacha1 said...

Well, you know you can generally count on me for an opinion. :-) In this case ...

I think it is pointless to consider excise taxes on non-nutritive food/beverages OR to consider a tax penalty for the obese ...

unless and until we have a single-payer health insurance and healthcare delivery system.

The only justification, in my view, of using financial incentives to get people to eat right and exercise is if these financial incentives are inextricably tied to a societal investment in good health.

Right now, our society is heavily invested in BAD health. Huge sectors of our economy are devoted to anti-health goods and services. Even our healthcare economy is actually more properly a disease-care economy, in which the most profitable businesses are health insurance sellers and drug purveyors.

If you can say, we are taxing everyone just a little bit more to cover the cost of a single-payer health scheme, and that health scheme is contrived with sufficient care and intelligence, then the extra tax money may actually have (eventually) its intended effect, which is to improve the health of the citizenry population-wide.

However, selective taxing - in a situation in which the tax dollars have no apparent destination that is of value to the entire population - is a proposition doomed to failure.

Ronda said...

Not only can a person get fat by eating foods that are considered "healthy," but some of the biggest junk food eaters I know are skinny as a rail. They may not be particularly healthy--who knows?--but they most definitely are not fat. And let's face it, taxes that try to manipulate public behavior are just a bad idea all the way around. Not only is it likely to be abused, but it is a very slippery slope from there to complete dictatorship, IMO. Every freedom squelched is another board in the fence.

Unknown said...

I work in the South Bronx in an area that many researchers have called a food desert. Fresh, healthy, pesticide-free food is either unavailable or too expensive for the vast majority of people living here. My students all receive government assistance and free lunch programs. In the morning, before they come into the building they buy chips and a soda for $1. The bottle of water that they could replace that soda with costs $1.25. The apple that they could buy to replace that soda costs $0.75. So the "healthy" option at the places where they shop is usually close to twice the price that the junk food is. If we really wanted to encourage better eating habits, maybe we could subsidize fruit and vegetable farms instead of meat and dairy. That way, the cheaper option would be to eat well. I would support a junk food tax *in addition* to this subsidization so that it becomes less an issue of access.

Anonymous said...

Kraft, Nestle, Coca-Cola, Pepsi, etc. all have too much money to fight either of these tax scenarios.

Soda companies spent $2 million (If my memory is correct) to fight a soda tax. The bought all of the ad space & time, every bus shelter, every billboard, every radio spot, etc. Meanwhile the people who wanted the tax were only able to raise $70K & as a consequence were not able to purchase ad space.

Without even thinking about whether or not the tax is a "good" idea.

One of the big tobacco (Philip Morris?) owns Kraft - you better believe that they have learned from their mistakes & are already strategizing on this subject.

Daniel said...

Some good comments so far. A couple of reactions:

Ronda: I don't know about the validity of the slippery slope argument here. The fact is that taxes do tend to be effective tools to reward or manage behavior (if they are structured properly or course!). It's certainly a reasonable debate to question if this is a good thing, or if it's manipulative or distorting... but I can't get from that debate to leaping to the assumption that dictatorship is around the corner.

Anonymous: It looks like you may have entirely missed the point of this post. Nobody is doubting or questioning that food companies have deep pockets and a strong financial position. In fact, this is one of the many reasons why I counsel readers--if they actually want to be truly empowered consumers, that is--to invest in consumer products stocks.


Milehimama @ Mama Says said...

I'm not in favor of a "fat tax", but I AM in favor of removing subsidies for corn used to make High Fructose Corn Syrup.

It's ridiculous to tax a product that we so heavily subsidize.