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Junk food taxes?

Barry Popkin and others have suggested a tax on sugar – or specifically on soft drinks – to curb the obesity-diabetes problem. Access Economics’ Lynne Pezzulo explained at the International Obesity Congress yesterday why such ‘fat taxes’ won’t be effective or fair.

There are several issues here. Taxes on unhealthy food would fall primarily on the poor who tend to eat less healthy diets – they are regressive. Being poor is associated with eating a poor diet and with being fat. In addition, the demand for food is quite price-inelastic so unrealistically large taxes would be necessary to alter consumption patterns. Further it may not only be the type of food consumed but also its quantity that drives obesity – for many bread is not a junk food but eat a loaf of it a day without an extensive accompanying exercise program and you are likely to have weight problems.

Pezzelo’s views were in stark contrast to the views of obesity researchers who favoured more heavy-handed regulation such as taxes, global advertising bans on all junk foods and subsidies for healthy foods.

Public opinion polls don’t generally supporting restricting the availability of high fat or sugary foods – most citizens believe instead that kids should just get more exercise.

In my view taxes are impractical partly because scientists cannot agree on what junk food is.

I also think that Pezzulo’s comments above are sound. As argued in an earlier post I do think however that there could be a case for an advertising ban on fast foods during child TV programs. I also think there is a strong case for providing people better nutritional information and for encouraging overweight Australians to take blood sugar tests to check on their diabetes status. Avoiding or delaying the complications of Type 2 diabetes complications would far more than adequately fund such a public information campaign. Otherwise I am fairly ambivalent about the case for introducing activist anti-obesity problems – although, giving that I am only beginning my research in this area, I try to keep an open mind.

12 comments to Junk food taxes?

  • Damien Eldridge

    Hi Harry,

    If the demand for food is very inelastic with respect to changes in its price, then Ramsey’s principle of taxation would suggest that we should be taxing it fairly heavily!!! Of course, if poor people spend a much larger portion of their income on food than the rich, then such an approach may be very regressive. Perhaps this is a case where equity trumps efficiency in a public policy setting? Or perhaps it is simply an example of political economy in action (everyone eats and as a resulkt everyone is likely to object if food is taxed more heavily than many other goods.)

    Regards,

    Damien.

  • hc

    Damien, We are not trying to minimise deadweight losses here but to address claimed externalities. Equity definitely intrudes.

  • David Jeffery

    Is the demand for particular types of food (as oppposed to food in general) very inelastic though? Eg, if the price of high sugar breakfast cereals goes up, won’t people switch pretty readily to similar low-sugar cereals?

    Also, I wonder if the GST has actually had a (modest) beneficial effect on public health. Processed foods are subject to GST but fresh foods aren’t. So we already have a crude sort of fat tax (though probably set at too low a level to have much impact if demand for processed food is price-inelastic).

  • stephen c

    I think that the case for junk food advertising bans is pretty weak.

    Family and peers are far more important to children’s food choices.

    The research undertaken for Ofcom in the UK for its current consideration of this issue found that children’s junk food advertising had less than a 5% direct effect.

    The research noted a larger indirect cumulative effect but provided no estimates- and didn’t seem to really have them (with much of the quoted work on the effect of tv junk food advertising actually being based on research on the impact of total tv viewing on violence in children!)

    That said, Ofcom seems to be swinging in the direction of some kind of ban. Which is a pity when the evidence is so flimsy.

    I think people prefer to use the advertising industry as a whipping boy rather than tackling harder issues – such as encouraging more exercise. A junk food advertising ban would take away the opportunity of canny food producers being able to advertise newer healthier (less junky) junk food and would also reduce funding of children’s tv programming.

  • FXH

    We could cease subsidies to Queensland Sugar farmers and allow imports from anywhere, then we could rail against eating sugar on the ground it was Un-Australian.

    Solves a few problems in one bang AND makes economists happy. That would be a first.

  • hc

    Good point David – the easticities foor narrow product ranges will be much higher so you might get useful leverage here. And some small beneficial effect from GST.

    I’ll google the source you mention Stephen C and get back. I agree the effects are likely to be small.

    fxh, subsidies are not a good idea. A number of writers more generally have suggested protection contributes to obesity – especially in the US.

  • Sam Ward

    “fxh, subsidies are not a good idea. A number of writers more generally have suggested protection contributes to obesity – especially in the US.”

    What contributes even more to obesity is just being a greedyguts who eats too much.

    If high-fructose corn syrup was the problem, then everyone in the US would be fat. They aren’t.

    Obesity is a result of sedentary lifestyles and eating too much, end of story.

    There were no fat people working on the Burma Railway or in Concentration camps in WWII.

    Eating less is actually a guaranteed way to lose weight, its just that some people would rather not do it and instead look to blame others for their own mental weaknesses.

    If you want an example look at Scott Cummings.

    As an AFL player he struggled with weight because he is naturally large. But because of discipline imposed on him by his employer and keeping active regularly, he managed to stay at a manageable weight (playing weight listed as 108kg, 194cm).

    Now he’s a retired commentator and resembles the side of a house. If you can seriously believe that advertising or agricultural subsidies is to blame for his weight gain then I don’t what to say except I give up.

  • James Dudek

    Yobbo – How can you not at least partially attribute the price of high fructose corn syrup to the increase in average weight?

    If subsidies to corn-farmers and sugar farmers (globally) were non-existant, then the choices for consumers in the marketplace would be healthier.

    As it stands the non-free market is saturated with high-sugar options and make it unprofitable for traders in healthy goods to get to market.

    Everyone understands that to maintain a healthy weight you need to consume less calories than you intake, but this is made all the harder for people to do when low-calorie choices are not making it to the consumers because of government subsidies to corn and sugar farmers.

    As usual, the answer is less government intervention not more.

  • Sam Ward

    “As it stands the non-free market is saturated with high-sugar options and make it unprofitable for traders in healthy goods to get to market.”

    And yet, the majority of people are still not obese.

    High fructose corn syrup or not, it is possible to eat yourself to obesity anywhere in the world. The fact is that most people simply don’t.

    There are plenty of healthy foods available for sale, even in the US. Fat people simply choose not to avail themselves of them.

  • James Dudek

    “There are plenty of healthy foods available for sale, even in the US.”

    I disagree – if it wasn’t for the subsidies there would be even more healthy foods available to the public. For example, at most places of work the cheapest and quickest lunches you can buy are high-calorie density.

    It’s easy for a young single guy to say that more exercise is the answer — but once you add a mortgage, job stress, a commute, a family it’s just not that easy to find the time and energy to burn excess calories.

    I’m not taking away from the individuals responsibility to balance all of those responsibilities and maintain a healthy weight, I’m just pointing out that for an average person it’s a struggle.

    The current government policies with regard to subsidies is making individuals fight the ‘battle of the bulge’ with one hand tied behind their backs.

  • Dr Franklin J Miller

    I agree with Mr Ward. Our food choices are our own and we should each take responsiblity for our diet and healthy lifestyles.

  • Anonymous

    Back to the comment that Sam Ward had, the size of the concentration camp workers had nothing to do with exercise it was mostly to do with malnutrition.

    My point however goes back to the late 1800s-early 1900s, the farmers of that time period were always fit, you never see a picture of fat farmer in those times. And the food they were eating back then consisted of high-fat meat, and high sugar quantities. But since these men had such a physically demanding jobs they immeadiatley worked those calories off after each meal.