The Food Tax (aka “Fat Tax” or “Soda Tax”) – An Appropriate Answer?

The concept of taxing certain food products more than others in order to sway consumers away from unhealthy products is an intensely controversial issue. Proponents of the food tax say it is necessary to protect the economy and public health. Interestingly, opponents of the concept claim that a food tax will HURT the economy and will do nothing to help counter the epidemic proportions of overweight and obesity that we are currently experiencing in this country and throughout the globe. So who’s right? Let’s sift through some of the arguments and apparently contradictory statistics quoted from both sides of the debate and look for the kernel of truth.

One argument for food taxes is simply that nothing else seems to be working. While many people from diverse locations on the political spectrum are wary of government intervening too deeply into the personal lives of citizens, it has become evident that the obesity train wreck in the US is not going away any time soon. Dr. William H. Dietz, director of the division of nutrition, physical activity, and obesity at the US Centers for Disease Control and Prevention, was quoted in 2010 as saying, “I don’t think we have in place the kind of policy or environmental changes needed to reverse this epidemic just yet.” Clearly, something needs to be done to fix the problem. Food taxes are one possible answer.

Another line of evidence in favor of a food tax comes from research studies looking at the interaction between the price of unhealthy foods and consumption patterns of those products.

One such study, published last year, evaluated how the price of pizza and soda affected the buying preferences of young adults. The researchers found that a 10% increase in the price of soda decreased its caloric contribution to the participants’ diets by over 7%, on average. In the case of pizza, a 10% increase in price led to an 11.5% drop in its caloric contribution. Additionally, soda and pizza prices were also found to significantly affect total caloric intake and body weight. That finding indicates that the calories NOT consumed by way of pizza and soda weren’t simply replaced by those from other sources. Instead, they were simply not consumed.

Another recent study from the Netherlands looked at how college students’ lunchtime preferences were affected by 25% and 50% taxes on high-calorie items. The research team found that the students decreased their overall caloric intake from the meal by 100-300 calories, depending upon the tax level.

A similar study actually put taxes like those seen in the Netherlands study to a real-world test. A Boston hospital instated a 35% tax on sugar-sweetened sodas sold in their cafeteria. The investigators found that sales of the taxed beverages fell by over a quarter and that consumers generally substituted coffee or diet sodas.

Finally, a study published last year by the USDA’s Economic Research Service (ERS) found that a 20% tax on sugar-sweetened sodas could reduce the prevalence of obesity by almost 10%. While that may seem like a relatively large tax for a relatively small decrease in obesity, consider that this study only evaluated the effect of taxing a single type of “unhealthy” food. If a similar tax was applied to other foods, an even greater decrease in obesity would be likely, as was observed in the Netherlands study of pizza and soda prices.

Clearly, there is scientific evidence supporting the institution of food taxes. However, as the saying goes, one can find statistics to support anything! Indeed, the opposition to food taxes has done a pretty good job at finding some numbers to support their view on this contentious issue.

One study referenced by the anti-food tax faction was performed at George Mason University (GMU) and examined whether the food tax would accomplish its goal of curbing obesity and how the economics of the tax would impact various demographic groups. The researchers concluded that sugar-sweetened soft drinks only accounted for a “trivial” amount of calories in the overall diet. They also pointed out that a tax on such beverages would likely be regressive, meaning it would negatively impact the poor more intensely than it would the rich. Because the poor spend a higher percentage of their earnings on food, any increase in food price will hit them harder.

There are a couple of problems with the GMU group’s analysis. First, what these researchers consider a trivial amount of calories may actually be enough to make a significant difference for many people on the border of overweight, obesity, or diabetes risk. In the GMU study, many of the examples given were of the tax’s effect on very overweight individuals. While a small tax on sodas will not be enough to solve serious problems like those, it can help people in less extreme, but still serious, situations. A study on overweight adults found that each kilogram of weight lost over a ten year period led to a 33% lower risk of diabetes in the subsequent ten years. In addition, each kilogram of weight gain was associated with a 49% increase in diabetes risk. Not so trivial, eh?

With regards to the claim of a tax on sugar-sweetened beverages being regressive, it’s true. Without any other considerations, such a tax would likely be relatively more injurious to lower-income individuals and families. However, in addition to the tax, a complimentary subsidy program has been proposed that would use the funds generated by the tax to make healthy foods more affordable. This subsidy could even be designed to primarily benefit the poor. With this offset taken into account, the regressive nature of the tax seems to be an economical non-issue.

Other studies cited by those opposed to the food tax note that physical activity is also imperative to maintaining proper body composition. Anti-food tax groups have proposed and even implemented a number of youth-oriented fitness and exercise programs to show their support for childhood exercise promotion. While they do make a valid point regarding the necessity of exercise for the maintenance of optimal health and fitness, they seem to use it as a reason for not also addressing nutrition in public health policy. The human body requires both proper nutrition and exercise, not only one or the other, to perform at its best, both physically and mentally. Playing one side of the coin against the other indicates either an extremely uninformed perspective on the subject of human health or simple bias. I’d tend to suspect the latter.

Besides the issues covered here, there are other considerations to address, such as food industry cooperation with the application of any new taxes. For the taxes to have the desired effect of lowering the public’s consumption of certain products, the industry would have to pass the increased cost onto the consumer. Unfortunately, food companies could instead choose to simply absorb it or distribute it evenly throughout their entire product line. Loopholes also exist through which local retailers may work to counteract the tax. In fact, there are many facets to this issue that demand further research and refinement in order to make the tax as efficient and fair as possible. But the potential problems with the implementation of a food tax should not stop us from considering it as a viable method to benefit public health.

Food taxes represent one potential tool to help turn the tide against obesity in the US. While attention needs to be paid to the method of implementation and the breadth of application, the research supports the realistic benefits of the concept. Research data show that a food tax, even a relatively modest and limited one, can make a significant and meaningful difference in the public health. Let’s not be afraid to try something different. Let’s not be swayed by the fear-mongering of those opposed to any sort of governmental action, even when it’s designed to counter the epidemic of our generation. Let’s instead commit to making changes that produce real results. A food tax can be a part of the obesity solution and it’s time to put forth effort to do it right.

This entry was posted in Tax and tagged . Bookmark the permalink.