Governments attempt to regulate consumer behavior through taxes. One tax that has been implemented is known as the “fat tax.” This tax is exactly what it sounds like, a tax on unhealthy foods. Aimed at primarily combating obesity, it has been most popular in the EU, who has been frightened by America’s growing obesity issue. Oxford and Nottingham University researchers propose that specifically a 17.5% unhealthy food tax has the potential to save 3,200 lives every year. To understand why governments are putting such a regulation in place, some key facts are needed. One out of every four British adults are obese. One out of every three American adults are obese. Poor diet is the main cause of 30% of death from heart disease. Many more health problems come along with obesity which increases health care costs. The financial costs are greater for obesity than for smoking or alcoholism (Silverman).
This tax is seen across Europe in various countries. The UN has recognized the role for a tax on certain foods acknowledging their potential effectiveness. A fat tax on fast food, soft drinks and sweets with the objective of raising tax revenues for funding health programs was considered in Romania in 2010. In July 2010, Denmark increased their taxes on ice cream, chocolate, sweets and soft drinks. This raised these products’ prices by 25%. They also decreased the taxes on sugar free drinks (Capacci et al.). Finland had a sweet tax from 1999 to 2000 that was reintroduced in 2011. This included products like candy, chocolate, cocoa-based products and ice-cream. A separate tax on soft drinks was increased and widened to cover more products. In Hungary, a tax on soft drinks, energy drinks, pre-packed sweetened products, salty snacks and condiments was implemented. The products being taxed here show the variety of products that different governments may deem “unhealthy.” France put in place a tax on all drinks with added sugar or with artificial sweeteners in 2012 and even extended in 2013. A version of this “fat tax” can be seen implemented across the EU (Gray).
As with any government regulation, advantages and disadvantages exist with this specific tax on unhealthy foods. One advantage is that the money from the tax can be used for government nutrition and education programs to better inform individuals about what foods they should be eating. The revenue can, also, be used to help those in need by subsidizing fruits and vegetables. This allows people across socio-economic classes to have access to nutritious food. The tax may pressure the producers of the products being taxed to cut down on the unhealthy elements or get rid of them, in attempts to increase sales on their part (Silverman). Considering 42% of the annual obesity health care costs are paid by public funds in the U.S., the tax revenue can help pay for the health care costs of obesity (“Should There Be a Tax on Soda and Other Sugary Drinks?”). A tax on soft drinks in Arkansas brings in $40 million a year. A similar tax in California brings in $218 million a year. Currently, 30 states have a “twinkie tax,” a tax on products with low nutritional value, in place, raising $1 billion per year nationally (Capacci et al.). Additionally, the “fat tax” has quite a few cons. It is unclear whether the tax reduces purchases enough to matter. A 20% tax on sugary drinks in the U.S., which is higher than any taxes currently imposed by individual states, would reduce the prevalence of obesity by 3.5% (Harless). Consumers who enjoy these “unhealthy” foods in moderation have to deal with the tax, even though the particular foods may not be harmful in moderation. Some may say that people should just be able to make their own decisions about eating habits (Silverman). The term “unhealthy” is, also, quite broad and possibly subjective, considering some may think artificial sweeteners in diet soda may be worse than regular sugar. Should such a food tax be focused on obesity or other health issues as well, such as cancer?
In order for a tax on unhealthy foods to succeed, the tax has to cover a wide range of products to produce the greatest health benefits. The tax must be at least 20% to have a significant effect on obesity and cardiovascular disease. It should be combined with subsidies on healthier foods (Mytton, Dushy and Rayner). To have the potential to succeed, a “fat tax” must possess these various elements.
Fast Facts
- to prevent overconsumption of unhealthy foods
- primarily targeted at obesity
- most popular in the EU (various countries including France, Romania Hungary, and Finland)
- needs to be 20% to have a significant effect
- should be combined with subsidies on fruits and vegetable
- 30 states have some variation of a “twinkie tax” – tax on products with low nutritional value (ex. soda