Should Fat Taxes Come to America?

August 21, 2006

The issue of obesity taxes was the topic of discussion recently at a conference in Australia. And once again, some doctors are advocating tax policy to achieve what they perceive to be society’s desired ends of less obesity. From New Scientist Magazine:

Food and drinks high in sugar should be taxed just like cigarettes, say economists who believe it is the only way to combat the global crisis in obesity.

“When two-thirds of the population of countries like Australia or the US are obese or overweight, you can’t handle the problem with simple solutions like education,” Barry Popkin of the University of North Carolina, Chapel Hill, told a meeting of agricultural economists on Queensland’s Gold Coast this week. Instead, he says, governments need to impose tariffs to replicate the success of tobacco taxes in reducing smoking.

The number of overweight or obese people in the world now exceeds the number of undernourished, and there are no signs that the spread of obesity and its associated diseases such as diabetes are slowing. The number of overweight people is increasing at over 1 per cent per year in many countries, says Popkin.

He proposes a series of tailor-made pricing incentives. Wealthy countries such as the US and Australia would tax sugar added to drinks, while China should target cheap, widely consumed high-calorie oils such as soybean.

As the article mentions, some have called for these types of taxes to be imposed in the United States. As we have pointed out before, there are numerous problems with these types of taxes being imposed in a society that claims to believe in individual liberty, private property, and freedom of choice. Thus, many advocates of these taxes are forced to go beyond the argument of government control over individual freedom and instead claim that obesity imposes significant costs on third parties; and thereby a proper role for government in controlling these externalities through taxation is warranted.

But even if one agrees with this argument that obesity has serious externalities, taxing certain foods is one of the worst ways in which this externality of obesity could be controlled. There are multiple causes of obesity, and not every additional unit of unhealthy food adds the same costs to society. An otherwise perfectly healthy individual eating a Big Mac once a month should not be forced to pay a tax on his purchase of this product because the additional cost to society from this Big Mac will be essentially zero. Also, someone who eats perfectly healthy but does not exercise at all may add more to third party costs of obesity than an individual who eats slightly-less-than-perfectly healthy food but goes to the gym everyday.

So if these advocates of fat taxes truly believe in targeting the problem of obesity, why not just go after the problem directly? That is, just impose a direct obesity tax on everyone in America, which would be based on how far the person’s weight deviated from the ideal for an individual of that age and height. All citizens could write their weight on their 1040 each year, and like all enforcement in our voluntary tax system, it would be subject to random audits by the government. Or we could do it through some other mechanism like a mandatory weigh-in each year at the local DMV. Sound ridiculous? Well, it would be much more efficient at targeting the obesity problem directly, and it totally avoids the problem of unfairly taxing those whose occasional consumption of unhealthy foods adds nothing to society’s costs of obesity.

Check out a recent Tax Foundation editorial on a soda tax proposal in one Colorado community.

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