August 8, 2007

Taxing Obesity: A Modest Proposal

This op-ed was published in The American on August 8, 2007.

Targeting foods is a needlessly indirect way of encouraging weight loss

The phrase “public health crisis” used to evoke fears of contagious disease spreading amongst a frightened population. With a New England Journal of Medicine study recently claiming that obesity spreads among friends, and a Johns Hopkins University study predicting 75 percent of U.S. adults will be obese or overweight by 2015, the so-called obesity epidemic is the public health crisis du jour.

A crisis wouldn’t be worth its name without panic. America’s nanny-state advocates are calling for “fat taxes” on unhealthy food and discriminatory bans on advertising to children, while across the Atlantic, Tory U.K. opposition leader David Cameron has actually demanded that chocolates be removed from supermarket checkout aisles!

It’s not the case that fat people, except for the extreme aesthete or frequent economy-class flyer, directly compromise others’ well-being, the way heavily-taxed alcohol or cigarettes arguably do. But even putting aside the quaint idea that government should leave people alone to decide their own size, what about the health-system argument? Isn’t keeping the obese in the lifestyle to which they’ve become accustomed truly an expensive proposition? If it is expensive—managing chronic diabetes and so on—one might still argue that the point of public health systems is to subsidize each other’s health needs. Sharing health costs should bring us together and engender a sense of community. Indeed, we should positively celebrate the subsidization of willfully enormous, ill people rather than try to tax the food they eat.

OK, that would be a bit much. Perhaps fat-taxers, who apparently don’t want to pay for the foolish choices of others, should instead agitate for dismantling the public health system, much of which exists to alleviate health problems resulting from poor decisions. A handyman lifts packages incorrectly and injures his back; the sexually promiscuous contract STDs; a narcissist stares into the mirror all day and needs psychiatric care; and so on. Many people’s behavior saps the public largesse for their recuperation; yet no one is lobbying to tax heavy parcels, nightclubs or mirrors.

If the government insists on trying to reduce obesity, then a tax on fatty foods is not the way to do it. It’s not well targeted, it’s not simple, and it’s not transparent. In other words, it fails every test of sound tax policy. Proposed fat taxes target a list of foods, usually starting with candy and then proceeding to butter, beef, etc. If adding cost to fatty food actually reduced consumption among potentially fat people and if these growing adults didn’t just bulk up on slightly less-fatty food (which becomes relatively cheaper), then maybe fat taxes could be effective. But this rosy outcome is unlikely. Slim people like fatty food, too, and there’s no justice whatsoever in making them pay more.

What about simplicity? A fat tax requires assigning a tax rate to every food product. Who is going to do this? Presumably, some government agency devoted to the nation’s nutrition will declare which foods must be punished, then watch to see if they’ve driven down sales sufficiently. But business, being business, will try to get around this by re-labeling and re-designing food to trick the fat police. The result will be a morass of fat tax complexity.

Finally, a fat tax is far from transparent. It will always be unclear who is actually bearing such a tax because there will be no reliable records kept about who buys what food when.

But there is a far better solution that has received surprisingly little public attention: the fat-person tax.

It is simple, transparent and neutral. This system would operate smoothly through the IRS, as everyone would submit an official Body Mass Index (BMI) report with their annual tax return. The IRS would make the fat tax calculation for you.

It would be a progressive tax: the fatter the taxpayer, the higher the tax. The top of the “normal” range for BMI is 24. A BMI above 25 would pay a small surtax, say 5 percent, BMI 30s would pay 10 percent, etc. The brilliance of Art Laffer’s flat income tax notwithstanding, a flat fat tax simply would not work, since it would not encourage weight-control once the taxpayer’s BMI was well above the taxation threshold.

To deter falsified BMIs, IRS doctors could offer a second opinion. BMI audits might be required at three or six-month intervals to get an accurate reading of each taxpayer’s average BMI during the year, and to prevent unhealthy fasting during the tax season. And given the latest research showing obesity spreads socially, the IRS could even demand friendship data (cross-checked) to ensure individual friendship networks don’t exceed a particular fat-friends quota.

Unlike communism’s poor, capitalism’s poor are generally fat, and the very poor even fatter. Indeed, up to one third of the three-year-old children in low-income families are reported to be fat or obese. Thus, to ensure its efficacy, any fat tax should be a bottom-line item on Form 1040, paid after all deductions and credits. For many obese, poor people, the passage of the fat-person tax may be the first time they’ve ever filed a 1040 with a positive liability: an especially poignant incentive to lose weight!

A fat-person tax, being evidently simple, transparent and well targeted, is not weighed down by any of the implementation problems of a fatty-food tax. But politicians should act now-the obese will soon be a majority, and once that happens, the fat cats in Congress will never enact a fat tax.

Australian economist Adam Creighton is a Commonwealth Scholar at Balliol College, Oxford, and summer Research Fellow at the Tax Foundation.