This week, Denmark begins a large-scale incentives trial of sorts by becoming the first country to impose a nationwide fat tax. From now on, foods in Denmark with saturated fat content above 2.3% will be taxed 16 Danish kroner ($2.87) per kilogram of saturated fat; which works out to a tax of about $1.28 per pound of saturated fat. The tax was reportedly preceded by weeks of Danes stocking up on items like butter, red meat and pizza.
The issue of taxing fatty or sugary foods (and more broadly, the effectiveness of behavioral nudges) has been a topic of repeated discussion on this blog. James McWilliams posted last December on studies which indicate that while taxing sugary sodas reduces consumption, others have shown soda taxes to be ineffective at reducing obesity rates. Proof, McWilliams argues, that taxing specific food items is ultimately ineffective, since consumers can simply substitute sugar from other non-soda sources.
Research also indicates that taxes on specific types of fatty foods need to be quite high before impacting our behavior. For example, the results of this 2007 study show that a 10% tax on dairy fat reduces fat consumption by less than one percentage point. Steve Sexton‘s post last month deriding the notion of mandated calorie counts fired up a lot of our readers. In it, he points to this Stanford study (ungated version here) that shows New York City’s calorie-count law to be fairly ineffective at reducing calorie consumption, at least when it comes to NYC Starbucks.
This all underpins what’s so interesting about the Denmark tax: instead of taxing a particular product, it casts a wide net around all saturated fats. Most importantly, it gets straight to the point: rather than gently reminding people of what they should (or shouldn’t) eat, it is a real fat tax.
But, why Denmark? The country’s obesity rate of 10% is traditionally below the average for OECD countries. Apparently, the Danish government isn’t satisfied with the life expectancy of its population, currently 78 years. A primary goal of the tax, reportedly, is to push that to 81. Which of course may carry its own economic ramifications.