Policy

Tax Fat to Fix Fat?

Hungary has made recent headlines (Hungary Tries a Dash of Taxes to Promote Healthier Eating Habits; NYTimes; 3/2/2013) with its salt tax, one of an increasing number of European taxation policies aimed at reducing rates of obesity, diabetes and cardiovascular disease associated with consumption of unhealthy foods. As Suzanne Daley, author of the NYT article, notes, Hungary has one of the highest rates of salt consumption and obesity in the European Union. The result? One of the lowest life expectancies of all 27 member countries in the European Union.

Enter the taxation strategy. Daley writes that Hungary has “imposed taxes on salt, sugar and the ingredients in energy drinks, hoping both to raise revenues and force those who are eating unhealthy foods to pay a little more toward the country’s underfinanced health system.”

Despite the efforts of Mayor Bloomberg in NYC to take a limited approach to publically managing food consumption (banning trans fats and, most recently, trying to ban soft drinks that exceed 32 ounces), the tax-it-to-change-it approach to food and obesity has not been a common strategy utilized in the United States. So the question becomes: can and should this be an policy avenue we utilize to address increasing waistlines, associated diseases, and ever-rising healthcare costs?

A recent series of NPR clips illustrates a problematic outcome of this approach: that taxing “bad” behavior can lead to unanticipated and negative outcomes that don’t solve the problem. Take Denmark, for example. In 2011 the Danes passed a tax charging an extra 16 Kroner – or about $3 – for every kilogram of saturated fat. Foods such as butter, oils, meats and sweets were all affected. 

But in 2012, the Danish government rolled back the “fat tax.” Why? Because, although consumption of butter, margarine and oil decreased by about 10-20%, Danish businesses were negatively affected by reduced purchasing as customers decreased spending in Denmark and increased frequency of shopping trips to Germany to purchase oils, meats and sweets at a lower price.

Similarly, it remains to be seen whether Hungarian consumers will eat more healthy foods in response to the salt tax. Alternatively, they may circumvent the law by purchasing products from other countries or eating foods with cheaper, less healthy ingredients produced by an industry specifically producing new products that avoid taxation. In a conversation with Matt Ritter, the State Representative for the 1st Assembly District in CT, I asked him about this topic. He brought up the suggestion that public and/or tax policy may be better aimed at incentivizing desirable behavior rather than penalizing undesirable behavior. We will no doubt continue to encounter considerable debate about the role of policy in enforcing consumption and regulating what we consider to be very personal habits.

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2 thoughts on “Tax Fat to Fix Fat?

  1. Interesting post. Applying a “sin tax” to food does seem a bit tricky, as you point out with the Danes. Another problem: because sin taxes generate such high revenues, they hook governments on the bad behaviors that they are trying to limit (I think this is why Gov Christie is currently pushing hard to legalize online sports gambling). And even our gas taxes get tricky because they generate revenue for road repair…so is it in the gov’t’s best interest to limit gas guzzlers or not? One interesting approach to the problem: corporate self- efforts to limit salt and other food additives. NYT journalist Michael Moss reports on efforts by Kraft to do this after they figure out that their product research people are contributing to the American obesity epidemic. Fresh Air ran a really interesting interview with him:

    http://www.npr.org/blogs/thesalt/2013/02/26/172969363/how-the-food-industry-manipulates-taste-buds-with-salt-sugar-fat

  2. As long as we have the healthcare system that we do, those people creating their own sickness should pay something into the treatment pool of funding… Fat Tax is the way to go.

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