TCS Daily


Junk Taxes

By John Luik - March 8, 2006 12:00 AM

If people like Indiana Representative Charlie Brown and the World Health Organization (WHO) have their way, your next bag of chips, candy bar or soda pop may cost a lot more.

Early in the year Brown introduced legislation in the Indiana House of Representatives that might well serve as the template for national "junk food taxes." Brown's bill calls for taxing junk foods at an initial rate of 11.5 percent, one of the highest rates so far suggested. The legislation defines junk foods as any food with sugar listed as the first ingredient, all soft drinks and pop and any other food deriving 35 percent of its weight from sugar.

Brown, of course, is not the first obesity crusader to suggest that so-called unhealthy foods be taxed in order to reduce consumption. Ever since a 1994 New York Times op-ed piece by Yale University's Kelly Brownell, there has been a growing movement to bring in what was quickly dubbed the "Twinkie Sin Tax."

The activist David Ludwig has argued that one way for governments to fight obesity is to tax fast food and soft drinks. People for the Ethical Treatment of Animals (PETA) has proposed an eight-cent-per-pound tax on all meat and fish and the Center for Science in the Public Interest (CSPI) has suggested sin taxes on butter, potato chips, whole milk, cheeses and meat. The WHO has called for implementation of fat taxes as part of a comprehensive strategy to fight childhood and adult obesity. Detroit mayor Kwame Kilpatrick proposed a two percent tax on fast food and New York state Senator Felix Ortiz has gone so far as to suggest extending the fat tax to "movie tickets, video games and DVD rentals."

Eighteen states now have some version of a "fat tax" (seven states have tried and then repealed such taxes) usually on what are called HFSS foods — high fat, salt and sugar.

But before the fat police and tax departments start fantasizing about a vastly thinner population coupled with vast streams of new tax revenue, a closer look at the idea of a "junk food tax" is warranted.

To begin with, the idea of a "fat tax" is founded on the assumption that obesity and overweight are the products of eating junk food.

But the majority of studies that have looked at the links between specific foods or specific consumption patterns, particularly in children, have failed to find a causal link between the sorts of foods to be targeted by sin taxes and weight gain.

For example, in a 2005 Canadian Medical Association Journal study, Canadian researchers Paul Veugelers and Angela Fitzgerald looked at the nutritional and physical activity patterns of 4,298 fifth grade students. They found that neither soft drink consumption nor eating in a fast food restaurant more than three times a week — both continually cited as causes of overweight and obese children — were associated with statistically significant increased risks of becoming overweight. And these findings were hardly atypical.

A Harvard research team, led by Allison Field, which studied children's consumption of junk food and whether this led to undesirable weight changes reported in the International Journal of Obesity in 2004 that there was no statistically significant association between snack foods, with or without soft drinks, and Body Mass Index (BMI) change for either boys or girls. In another 2004 analysis of data form the National Health and Nutrition Examination Survey, Richard Forshee et al found that consumption of the two drinks continually blamed for increases in obesity — non-diet soft drinks and fruit drinks — was not associated with increases in BMI for either sex.

In fact, even fat tax crusader David Ludwig's 2001 prospective study in the Lancet shows that if all subjects in his study stopped consuming all sugar-sweetened drinks the net decrease in BMI would be an insignificant 0.3. And that study failed to determine whether the crucial factor in this insignificant weight change was the beverage itself or the behaviors associated with its consumption.

In another much touted study by Catherine Berkey et al, the change in BMI for the subjects was even less than in the Ludwig study. More important, the researchers admitted that "adjusting our models for total energy intake substantially reduced the estimated effects, which were no longer significant." (Emphasis added.)

But there is a second problem with the "junk food sin tax," and that is little scientific evidence links particular food or groups of foods such as supposed junk foods with obesity or specific diseases.

This point was most dramatically made by recent studies on the effects of low-fat diets on heart disease and cancer, all of which showed no reduced risks. As Barbara Howard, principal investigator in one of the studies noted, most of the claims about the links between disease and lifestyle issues like diet are based on "indirect evidence." As she told The New York Times, "We are not going to reverse any of the chronic diseases in this country by changing the composition of the diet."

Indeed, as nutritional epidemiologist Tim Byers from the University of Colorado noted in 1999 "The classic criteria for causation are often not met by nutritional epidemiologic studies, in large part because many dietary factors are weak and do not show linear dose-response relations with disease risk." In fact, the evidence connecting certain foods and diseases, including obesity, is almost exclusively derived from ecologic epidemiological studies, which are the weakest kind.

That's not all. Aside from the fact that there is no connection between the foods that a "junk food tax" would target and being overweight and obese, and no connection between these particular foods or indeed any foods and specific diseases, there is also the small problem that a sin tax on junk food will most likely not reduce demand for the food, which is, according to its proponents, the entire point. For instance, as J. Eric Oliver notes in his book Fat Politics, there are no statistically significant differences in obesity rates between states that do and do not have sin taxes on junk food. Arkansas, Virginia and Washington have such taxes, for example, and there has been no discernable impact on consumption of taxed foods.

The reason for this is that demand for food, including junk foods, tends to be largely insensitive to price, except for certain foods in certain socio-economic groups. Most economists suggest that even a 10 percent tax would result in less than a one percent reduction in demand. According to Fred Kuchler of the USDA, a typical household spends only about $26 on potato chips a year. About 99 percent of US households purchase some "salty snack" a year, "on average spending $76 on 31.8 pounds." As Kuchler concludes snack foods appear "to be a relatively small expenditure for all types of households," and taxes on them would at most achieve a loss of two pounds with a BMI reduction of "close to zero."

And all this assumes that the market would not respond. If demand dropped, manufacturers might lower the price of taxed foods, offsetting the tax and eventually mitigating any effect on consumption.

Then there is the not insubstantial problem of unintended consequences. Nutritionist Adam Drewnowski and S.E. Spector have found that those with lower incomes react to higher food prices by eating even fewer fruits and vegetables and more — not less — prepared foods. Thus taxing junk foods not only fails to change consumption patterns for these individuals but may even encourage them to eat more unhealthy foods.

A recent Danish study, for example, concluded that sin taxes on junk foods would fail to reduce consumption in the groups with the highest current consumption of these foods, namely the poor. Additionally, it would particularly disadvantage these groups however the tax were designed — a tax on fats would increase sugar consumption; a tax on sugar would increase saturated fat consumption.

Finally, there is the problem of intrinsic unfairness that attaches to a sin tax on food. As Richard Epstein of the University of Chicago Law School notes, such a tax affects all consumers- the slim and the fat, the healthy and the unhealthy consumer. "The person who counts calories and exercises faithfully is penalized because she chooses to eat a cream pie as part of a sound overall diet."

Such taxes, of course, have the potential to raise significant amounts of new revenue, over $2 billion nationally, at a 30 percent tax rate. But then the rationale, like that for tobacco taxes, is supposed to be changing eating habits and reducing obesity, not creating new sources of money for the government.

Of course, some of the obesity crusaders claim all that new money could be used for nutritional information campaigns to change the nation's eating habits and nutrition research to find out exactly what people should eat — money for advocates. However, when one looks at sin taxes on junk foods, one will find the idea is highly flawed, has failed where tried, and is utterly foolish as a health measure.

John Luik is writing a book about health policy.

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12 Comments

junk food taxes
Since the concern seems to be obese children, why not simply remove the dependent tax deduction of parents whose child(ren) is(are) obese according to the BMI? When they lose such a big tax deduction, many parents might be motivated to help a kid develop a healthy lifestyle.

Another idea...
How about allowing parents to raise their children the way they want? How about keeping government out of our daily food choices? And how about not penalizing anyone for obesity?

BMI is a highly suspect method of determining obesity in the first place and I wouldn't want to be financially penalized for falling into the "fat" or "sinful" category much less having the government test my children or myself without my consent.

Yes
Exactly.

I'm trying to understand how anyone can presume to dictate to others such basic choices. Can we all agree that government incentives are a bad/broken idea?

It's the tax, stupid!
Hey guys, regardless of the public line used to sell "sin" taxes to the public they have less to do with the general welfare than with raising tax revenues. Don't be taken in by the smarmy politician who claims to be concerned about your health and well being, especially when he or she proposes some taxpayer funded government program to improve the "general welfare" of the citizenry.

Which is not to say that we cannot trust politicians. Just remember that, like lawyers, they only lie when their mouths are open and their primary interest is most often their own political career. Hence, trust them to look our for themselves first and you'll be right most often.

It is just a excuse to raise a new tax
Politicans have to continue to raise taxes somehow and this is just another reason and excuse. Soon everything will have some tax on it. Why not start taxing people by their weight or size, by how much air they breathe? After all air quality has to be monitored and taxed too.

Someone has to pay for their large pensions, benefits, and salaries for all the federal and state employees. They have to continue to get raises now don't they?

This has nothing to do with fat or food. Any food in too much consumption will result in your body to store it, even oranges. Should we tax them too?

I thought this was the land of the free, I guess that was a long time ago.
The real sin is the sin tax.

Junk Taxes
Like Junk Science, this trend has nothing to do with public health and everything to do with control and self-interest. A small group of leftist "intellectuals" has decided it knows how best to live. While, thanks to our Constitution and our "common sense," they can't control us directly. So they use the back door by forcing us to pay greater amounts of our personal resources to live the way we want to and not the way they want us to. With a sin tax they attempt to force their lifestyle onto the great "unwashed masses" who will not only have to pay more for living life in a way the elite deems as "unfit," but the proceeds from the tax will go to the elite to fund more "studies" and more measures to tax the people into submission. We get to pay for the rope from which we'll be hanged. The bit about "improving public health" is just smoke and mirrors. It's all about public control. These people are just modern versions of *****. They're mantra: "Do as we say, or we'll get you."

Forced Calisthentics
If they're so worried about our body-mass index, why not force the citizenry to exercise?
It makes as much sense.
Oh. But wait. It won't raise any money for our grossly obese government(s).

We know whats best for you and we want your money
The Left is just using this as an excuse to steal more money to pour into their black hole social welfare programs. One day hell will freeze and the Marxists in the Democrat Party will propose a tax cut and an end to their endless welfare programs.

Pay for subsidy
Tobacco used (?) to subsidized.
Sugar is subsidized.
Corn is subsidized.
Wheat is subsidized.
For many people high carbohydrate foods enable fat accumulation.
But the government susidizes them?
I guess the tax is to pay for the subsidy.

The purpose
of liberals and liberal establishments is to:
1) Force other people to stop doing things that we (the all knowing, all caring elite) don't approve of.

2) Raise money so that we can spend it in ways that help us feel good about ourselves.

If 1 and 2 can align, then gloy hallelujah.

Whoa there
Sugar is subsidized?
If that's true, why are we paying several times the world price in our grocery stores?

Sugar farmers are subsidized, by the govt artificially limiting the supply, and hence raising the price. But sugar itself is not subsidized.

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