Study: Fat Tax Must Be Large
Proponents argue that junk foods are vices like alcohol and tobacco, which both have large taxes attached to them in many countries.
"Economists generally agree that government intervention, including taxation, is justified when the market fails to provide the optimum amount of a good for society's wellbeing," writes Oliver Mytton, of the British Heart Foundation's Health Promotion Research Group. Consumers fail to "appreciate the true association between diet and disease, time inconsistency (preference for short term gratification over long term wellbeing), and [don't bear] the full health and social costs of consumption."
Experts who study smoking-reduction efforts in the U.S. say financial sanctions have been by far the most successful stop-smoking incentive. After tobacco companies lost a class-action lawsuit in 1998, cigarette prices rose 50%, and smoking plummeted, says David Levy, a Georgetown University professor who studies tobacco control.
Previous researchers have suggested that smaller price increases, in the form of a tax, would move people toward more healthy foods. One study suggested that an 18% tax on pizza and soda would cut calorie intakes enough for Americans to lose about five pounds per year. Most studies on the subject suggest that a 10% tax leads to about a 10% reduction in calories consumed of the taxed product.
In America, such taxes have run into industry opposition. In 2010, a proposed penny-per-ounce tax on soda in New York died after soda companies called the plan a "naked money grab cleverly disguised as a health policy." Public opinion has also been mixed -- soda taxes have been supported by as many as 72% of Americans and have been opposed by a similar number, depending on who is asking.
Mytton analyzes a series of clinical studies and real-world results to suggest that countries should not bother with a fat tax unless they are willing to add nearly a quarter to the price.
"Taxation needs to be at least 20% to have a significant effect on obesity and cardiovascular disease," he writes. For best effect, that money should be taken and put into healthy food subsidies. Instead of targeting just sodas, policymakers should consider comprehensive taxes on fatty and unhealthy foods, as Denmark has done. "Taxing a wide range of unhealthy foods or nutrients is likely to result in greater health benefits than would accrue from narrow taxes," he writes.
From the May 16, 2012, Prepared Foods’ Daily News