Last month New York Governor David Paterson proposed an obesity tax to be levied on fattening foods. He characterizes America’s problem with obesity as a crisis. Drawing a comparison to cigarettes, he suggests that just as cigarette taxes reduced the number of American’s consumption of cigarettes, a tax on certain junk foods should reduce the consumption of unhealthy fare.
“Just as the cigarette tax has helped reduce the number of smokers and smoking-related deaths, a tax on highly caloric, non-nutritional beverages can help reduce the prevalence of obesity”
While Patterson’s proposal focuses on sodas and other sugary drinks, the general concept of taxing foods that are detrimental to health is interesting.
“Obesity Tax”: A name destined for disapproval
I am not sure who came up with the term “obesity tax”, or the even worse term “fat tax”. I haven’t yet read about those words coming out of Paterson’s mouth. It’s a terrible name that is destined to only increase resistance to a tax that is already likely to have a large group of adversaries. Calling this an “obesity tax” is akin to calling the tax on cigarettes a “lung cancer tax”. It’s never good to sound like you are taxing people’s problems (in this case obesity). But taxing the cause of their problems (in this case junk foods) seems to be more palatable, and in this case also more accurate.
Additionally, to some extent, the term “obese” describes a category of people, mainly those suffering from obesity. An “obesity tax” sounds like it unfairly singles out those people for taxation. It also stigmatizes that group in a way that is unacceptable.
The fact is that Paterson has expressed no intention of taxing people who suffer from obesity. He intends to tax the sales of certain unhealthy foods regardless of the body type and health of the person who purchases them. The term “obesity tax” has the ring of a term coined by someone who intended to rile the reader. A more accurate, although somewhat less dramatic sounding term, would be “junk food tax” or “unhealthy food tax”.
Why tax junk food?
Setting aside phraseology, the question remains about whether these foods should be taxed. Generally, the arguments in favor of taxing these types of foods are:
- The tax creates a deterrent to the consumption of unhealthy foods leading to (1) healthier people and (2) reduced burden on our health care system from treating the adverse results of the consumption of unhealthy foods.
- The tax will generate revenues that can be used to combat the so called “obesity crisis”, including education and treatment.
The proposed tax on unhealthy foods is an attempt to, through taxation, regulate self destructive behavior. This is not dissimilar from the tax on cigarettes. And there is evidence that cigarette taxes have reduced cigarette consumption. A recent article in BusinessWeek makes a stark comparison:
“Obesity is now closing in on smoking as the leading cause of preventable death in the U.S. But unlike obesity, smoking rates have been declining since 1964, when 42% of American adults smoked. In November, the CDC reported that the U.S. smoking rate had dipped below 20% for the first time on record, and public health experts give much of the credit for that decline to extremely high taxes enacted over the last 15 years on tobacco products.”
Should the government regulate self destructive eating habits?
As Americans we generally believe that we should have the freedom to choose to partake in certain pleasures in life, even if there is a danger associated with the activity. After all, so many of the activities that we enjoy carry some calculated risk. Past times like playing football, riding motorcycles or SCUBA diving all carry some measured risk and we aren’t about to start taxing or regulating participation in those activities. Similarly, being sexually promiscuous in this day and age carries well known risks. While considerable effort is made to educate people about those risks, legislators are not about to regulate or tax the sexual exploits of consenting adults.
However, we have for some time accepted many form of behavioral regulation of citizens including the tax on cigarettes, restrictions on the sale of alcohol and laws requiring the use of seat belts in cars and helmets on motorcycles. These are all laws that aim, to varying extents, to regulate what is perceived as self destructive behavior. The quintessential example of laws that regulate behavior deemed to be self destructive are drug laws. It would be natural to respond to the above comparison with a bit of trepidation. In our society there is a big difference between the perceived harm caused by the consumption of a Big Mac versus that of heroine. But while there is a qualitative difference in the riskiness of the regulated behaviors, there is a categorical similarity between these laws in that they both regulate self destructive behavior.
Readers may recognize the above discussion as leading to a slippery slope argument. If obesity taxes are instituted, then where do we draw the line about what can be taxed or regulated? Should the tax apply to only the unhealthiest junk food? Or should it apply to anything but components of the healthiest diet? And if a tax on unhealthy food is ok, why not a tax on other risky behavior like sky diving? Where is the line drawn?
Alternatively, we have already accepted that the regulation of unhealthy behavior is acceptable in the form of taxes on cigarettes, restrictions on the sale of alcohol and of course the drug regulation. In what way is a tax on the sale of unhealthy foods categorically different from the above legislations?
Is there a clear distinction between over consumption of junk foods and other regulated self destructive behaviors? Does the danger of junk food consumption rise to some threshold level making it appropriate subject matter for legislation? Some data from the Office of the Surgeon General may help to illuminate the seriousness of the dangers of unhealthy eating habits:
- Overweight and obesity result from an imbalance involving excessive calorie consumption and/or inadequate physical activity.
- 61% of adults in the United States were overweight or obese (BMI > 25)* in 1999.
- 300,000 deaths each year in the United States are associated with obesity.
- The economic cost of obesity in the United States was about $117 billion in 2000.
Is this tax fair?
The argument has been made that a tax on the sales of unhealthy foods is regressive. That is, it disproportionally taxes lower income tax payers. Generally, two theories for why a junk food sales tax is regressive have been proposed:
- It is regressive simply because it is a sale tax.
- It is regressive because lower income citizens tend to purchase more unhealthy food.
The first theory is based on the common theory that all sales taxes are regressive. If a low income and a high income citizen each purchase a six pack of soda, the tax on the purchase will constitute a larger portion of the low income citizen’s paycheck than it will for that of the high income citizen. This is a difficult anomaly to practically overcome. In order to institute a tax on the sale of unhealthy food and not have it be regressive, the tax would have to be based on some formula that takes into account both purchaser’s level of junk food consumption and income level. This would indeed be a difficult tax to implement. Further, to the extent that the proceeds of the tax are meant to subsidize the cost to society of the consumption of unhealthy foods, the tax should be proportional to the level of consumption, not the income level of the consumer. However, to the extent that the tax is meant to discourage the consumption of unhealthy foods, low income tax payers would be disincentivized more than higher income tax payers. Higher income tax payers would thus receive less benefit from the government’s attempt to protect citizens from self destructive eating habits (Yes, I managed to argue that a regressive tax treats the wealthy unfairly).
The second theory about why this tax would be unfair is that lower income citizens tend to eat more of the kinds of foods that would be taxed. If we make the bold assumption that the tax is accurately applied according to the unhealthiness of the foods, then this argument is essentially that the tax will apply discouragement to those who need it most. However, there is indeed some question about whether the tax will be accurately applied in a way so that it does not favor food preferred by higher income consumers. For example, will the tax be applied to all sugary drinks? Or will higher priced juices be taxed the same as lower priced sodas?
Timing is everything
The proposal for a new tax on unhealthy foods comes in a time of economic hardship for many citizens. A movement to tax foods that are an inexpensive source of happiness in tough economic times is going to be unpopular. A poll by the Quinnipac University Polling Institute found that New Yorkers opposed the tax 64 to 32 percent.
Does all junk food consumption really contribute to the obesity crisis?
Consumption of junk food, like consumption of other unhealthy consumables such as alcohol and cigarettes, does not always lead to health problems. If consumed in moderated and intelligent amounts, junk food need not lead to obesity or health problems. Although the tax is not required to influence the consumption behavior of moderate junk food consumers, they would still be subject to the tax. To some extent, the junk food tax would thus tax an otherwise reasonable delicious treat for many Americans.
Where do we go from here?
Notwithstanding the data, there is a natural visceral opposition to any attempt by the government to influence food choices through taxation, or any other type of legislation. Does this reaction stem from a categorical difference between the consumption of unhealthy food and other types of regulated unhealthy behavior? Or is it a human reaction to having yet another type of behavior regulated? Nonetheless, there is little debate that America needs to improve its eating habits to curb the growing epidemic of obesity.
Paterson is not the first to propose a tax on unhealthy foods. It was first suggested in the 1970′s and was advocated in the 1980′s by Kelly D. Brownell, Director of the Rudd Center for Food Policy and Obesity at Yale.
 The magnitude of the difference in risk between consumption of drugs and consumption of junk foods is debatable. Drug abuse can have very sharp adverse affects on the health, family and career of the consumer. While, on an individual level, the adverse affects of junk food seem dull in comparison, over consumption of junk foods is a far more prevalent behavior and results in far more deaths than drug abuse.
 Obviously, not all Americans believe that these regulations are good. Many Americans protest drug regulations and even helmet laws. But, nonetheless, the legislation exists and thus, good or bad, they are a part of our social contract.
 http://www.surgeongeneral.gov/topics/obesity/calltoaction/fact_glance.htm The data from the Office of the Surgeon General is a bit dated. But most indicators lead to increased problems with obesity in recent years.
 Many nutritionists contend that juices are in many ways just as unhealthy as sodas: http://www.cbsnews.com/stories/2005/02/11/health/main673229.shtml
 Some other findings of the Quinnipiac University Polling Institute:
- New Yorkers approve of the job Governor Patterson is doing 53 – 25 percent but are split 43 – 42 percent on his handling of the state budget.
- New Yorkers support raising taxes on millionaires 80 – 16 percent
It may be relevant to note that the questions about the tax on healthy food (1) labeled the tax an “obesity tax” or “fat tax” and (2) asked the question in the context of a series of questions about the New York State budget and alternatives to improve the budget. The context of the question may have cast the issue as more of a budgetary issue as opposed to a health issue. And given the timing of the proposal, it is not unreasonable to think that the motivation behind the tax is increased state revenues.
 Moderate junk food consumers would obviously pay less tax on the purchase of junk foods than heavy junk food consumers.
There has been some discussion about formulating the tax so that the amount of the tax would be correlated to some measure of the consumer’s health such as body mass index (BMI). There are a variety of obstacles that make this kind of tax unpractical. BMI and other health indexes have known limitations in the degree to which they accurately reflect the health of the testee. Further, Americans would certainly reject the health tests required by this kind of tax as intrusive and offensive.