Fans of a “Fat Tax” Will Be Saddened by the News From Denmark

(Photo: ebru)

The other day, Levitt and I participated in a brainstorming session on how to fight childhood obesity, sponsored by the Robert Wood Johnson Foundation. (FWIW, we recorded the event and will try to turn it into a podcast.)

One topic that got a lot of traction was a targeted tax on sugary drinks and fatty foods. (This is often called a “fat tax” but should not be confused with a tax on overweight people.) Many people in the session were in favor of the idea but a few were skeptical, primarily because such a tax will be tricky to implement well. One objection that I was surprised no one raised: the simple fact that taxpayers might hate the tax and rebel against it to the point where it becomes politically and economically impossible.

In support of the idea, one person reminded us that Denmark recently instituted a “fat tax” on  foods containing more than 2.3 percent of saturated fat.

Talk about bad timing! Writing in yesterday’s Wall Street Journal, Clemens Bomsdorf informs us that:

Danish lawmakers have killed a controversial “fat tax” one year after its implementation, after finding its negative effect on the economy and the strain it has put on small businesses far outweigh the health benefits. …

Products such as butter, oil, sausage, cheese and cream were subject to increases of as much as 9% immediately after the new tax was enacted.

“What made consumers upset was probably that an extra tax was put on a natural ingredient,” said Sinne Smed, a professor at the Institute of Food and Resource Economics.

The fat tax comes to an end after netting an estimated €170 million ($216 million) in 2012 in new revenue. Danish lawmakers will slightly raise income taxes and reduce personal tax deductions to offset the lost revenue. The lawmakers also decided on Saturday to reverse an earlier decision to create a sugar tax.

Does this mean the idea of a fat tax isn’t viable here? Hardly. But, regardless of your view of the issue itself, this is yet another  example of how long-term policy can be affected by the short-term state of the economy. New taxes are rarely popular but that is especially true when many of the world’s economies are still trying to climb out of a deep trough.

Fans of the idea should console themselves: in the years it will take to refine, experiment with, and wrestle over a U.S. fat tax policy, our economy will probably be booming again!

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  1. Steve Nations says:

    You say “fat tax,” I say “nanny state tax.” No thanks.

    In the book “Wheat Belly” author William Davis makes a good argument that wheat has been modified so greatly over the decades to make it more tolerant of bugs, pests, drought, etc. that it now isn’t very good for you. The body turns it directly into sugar very quickly, so it turns to fat.

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  2. Eric M. Jones. says:

    I suppose the “Food-Fat Tax” was calculated to pay for some of the healthcare-burdens of fat people. Canada figured out something similar years ago when they imposed exorbitant taxes on cigarettes. The US has followed this plan for cigarettes somewhat, perhaps only haphazardly. At least there is a pretty hefty tax on alcohol.

    Although I applaud the efforts to control people’s behavior by taxes, I think they will be unsuccessful. The only feasible solution is medication. Willpower never worked for anything much.

    Sorry.

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  3. Morten says:

    Denmark already has a sugar tax. This was a new one that e.g. would tax the sugar in pickle juice. Even though it is discarded.

    The idea was that saturated fats caused heart disease so as the income from the fat tax decreased so would the expenses to heart disease. Unfortunately, the idea that saturated fat has a large and significant impact on heart disease rates have been discredited. Latest focus is on simple sugars and simple carbohydrates. We’ll see how that pans out.

    Basically, we look at the anglophone countries and go “Ew”.
    Personally I think the most effective law to target obesity would be to ban food adverts, same as we do for alcohol and tobacco. You might argue that there are ads for healthy food but they are exceedingly rare.
    I don’t see how we can do anything about people being sedentary however. Which is probably the biggest single threat (according to current research).

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  4. Alex in chicago says:

    We could let kids bully fat kids and get away with it. “The fat kid exemption”

    There is an incentive

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  5. Ryan says:

    I think we should look at this from the opposite angle. To my, mostly ignorant of the topic, understanding, a good start would be not a tax, but a removal of a subsidy. My theory (frail as it is) goes as such – stop subsidizing corn production and thus make foods/drinks/etc filled with corn syrup more expensive. What are the unintended consequences here?

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    • Michael says:

      Great idea in theory but there was a reason corn was subsidized in the first place, if you take away corn subsidies you end up with much more expensive food. I’m not saying that’s a bad idea, I think it’s a good one but if food becomes more expensive overnight then we have another very big problem. Corn is in everything because its so cheap. In fact thinking about it it’s pretty much then main food source for cattle and livery isn’t it? I think even the animals we consume are fed on high percentage corn diets. I saw a stat once that every American, genetically is 75% corn :-)

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      • Ryan says:

        Ha, I’m sure that stat is true. And I agree, more expensive food, you are correct. I think that’s what a tax would do too, no? And I think the idea is that fat is not dangerous (except when over done, like most things), but the more dangerous is sugar. Why is sugar added? Clearly to make things taste good. But wouldn’t that drive up the price? Not when you have a cheap source of sugar. What’s a cheap source of sugar? Corn syrup! So that was the point mainly. And if we all ate a little bit less meat because it was more expensive, I don’t think I’d have a problem with that either.

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  6. caleb b says:

    With socialized medicine, there exists two unique incentives for me as a tax payer:
    1) Encourage all people to be as healthy as possible and costs will be low, or
    2) Encourage people to engage in activities that won’t kill them right away, but when it does strike them, they just die, with no expensive, prolonged care.

    So based on 2), cancer is very bad for society, but heart attacks are actually very good. Especially since heart attacks also limit social security payments. So maybe if we want to lower health care costs, we should encourage more heart attacks.

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    • Paul M. says:

      Well, that would be true… if people weren’t surviving heart attacks. Personally, my father has survived two massive heart attacks before he was 50 (pack-a-day and a poor diet for 30 years will do that) and now has very expensive medication that he takes, albeit on private insurance. On the other hand, my step-father is currently undergoing treatment for stage four neck cancer, was never a smoker or heavy drinker, but all of his treatment is being paid for by his VA benefits. So, you have a situation where one person is paying for all of their unhealthy decisions and another, who engaged in none of the risk increasing activities, who is having all of their costs paid for by the public benefit he enjoys from his military service.

      So, since the cost allocation varies greatly from individual to individual, I have a feeling you, as a tax payer, should just want to encourage as few health problems as possible.

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    • Kathleen Cloheesy says:

      Thant might be true if everyone died from a heart attack. Unfortunately-from, your point of view- most don’t. They go to the hospital where they rack up thousands of dollars in ICU care, then have triple and quadruple bypass surgery so they can go on and live another 20-30 years.

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      • James says:

        Even if they do die from that first heart attack, it’s often after racking up thousands of dollars of ICU care…

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    • Michael says:

      If Coca Cola really wanted to make people healthier they’d stop selling their silly fizzy drinks. (They’d certainly stop advertising it to children). But instead they give a tiny amount of money as a token gesture, indeed it’s just an investment in PR to make them look more socially responsible when anyone with any sense knows that’s not true. What’s worse is that politicians lap it up most likely because they’ve been pressured by lobbyists. It’s all a bit sickening really.

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      • Joe says:

        I think you’ve captured something important here: The idea that they are just another victim of evil companies. Coca Coca isn’t in the business of being evil, they are in the business of profit-maximizing. What happened to people taking responsibility for their lives?

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    • Michael says:

      To some extent I agree that people need to take responsibility, at least when they can. But unfortunately due to many factors they are unable to.

      Two obvious ones.

      1. Education.

      People simply aren’t educated enough in nutrition and even if they wanted to be there’s such a deluge of nonsensical information out there that it’s way too confusing and impossible to expect people to be able to distinguish the good from the bad. So they rely on advice from doctors (often idiotic) the Government (just as idiotic) the internet (often less idiotic but still not great)

      You simply can’t suggest culpability when it’s almost impossible to get your hands on the right information.

      2. The power of marketing.

      These companies know exactly what they’re doing. They are BRILLIANT at it. As they should be considering the money involved. I’ll offer example that’s not on topic per se but an interesting one.

      Let’s look at the bodybuilding or fitness community. These guys spend years perfecting their bodies, sculpting them, looking at nutrition etc. If anyone should know what they’re doing it’s them. And most of the time they do. They eat well, train well and can’t be criticised. Until it comes to buying products. The moment it comes to buying supplements their brains turn to mash. L Carnitine, BCAA, L Glutamine, Beta Alanine, Whey isolate, Creatine HCL, argenine and so on, these are all increments they jump on, buy, get convinced to buy through brilliant marketing from the supplement companies.

      They spend a fortune on what is essentially a placebo. A FORTUNE! They buy into all these supplements and they might as well throw their money away or burn it.

      How do otherwise intelligent and knowledgeable people turn into idiots? It’s all down to marketing.

      The same goes for food and the food companies, but in their case even more money is involved. So they do everything in their power to convince you to buy their product, without you even knowing it. They push ‘low fat’ and spend millions, billions on promoting low fat diets. Low fat is jut another term for ‘Chemical Sh*tstorm’ but people buy into it.

      They come out with all kinds of crazy claims about how a product will aid health or help you lose weight. They emotionally trick you into buying food for your children. “Your kids need the best and product XXX is the best, here’s the evidence for this”. Of course there’s no evidence whatsoever. They’re making it all up but there’s big money involved.

      They sell battery hen eggs boxed with a sticker on showing a farmer sowing seeds. Is that how these chickens were raised? Of course not.

      Then you need to think about the science behind the marketing and the food. The colourings they use, the psychology of the sell. People just cannot take responsibility when they have no control due to the power of the selling model and buying experience. Foods are sold in such a way that the choice is almost taken out of our hands.

      Here’s the truth. People should eat as if they lived in a forest and only food they can grow or cultivate, catch or rear themselves should be eaten. So eat beef, fish, vegetables, fruit, nuts, seeds but stay away from processed refined crap.

      Sounds good right?

      I do this. I live in this way but let me tell you something, to do so is ‘almost’ impossible. Everything conspires against you :) I try and make my kids eat healthy foods but it’s so difficult. Not because I can’t control them or a weak, but because the moment they go to school for a school lunch they’re fed nonsense. So I make packed lunches and hope for the best. I also don’t mind if they have the odd naughty bit of food, moderation is key, but I’m also fortunate in that they have grown up eating really well and wouldn’t dream of drinking a soda. “Urgh dad, that stuffs disgusting”. Phew :)

      So I’m all for sticking it to the 300 pound guy that sits about and eats chocolate all day but often it’s not so simple, not so black and white. There are women out there thinking they’re doing the right thing, eating the right foods but they are getting fatter and fatter. Blaming them isn’t fair.

      Here’s the advice we should be giving to a fat person.

      1. Stop with the exercise. Why? Because 95% of losing weight is diet. If you begin to exercise you will create hunger and appetite and first we need to clean up your diet. Exercise makes you fat, good article here http://www.time.com/time/magazine/article/0,9171,1914974,00.html

      2. Stop eating processed foods. Stick to greens, vegetables, meat and fish (grass fed if possible and organic)

      3. Don’t eat any sugar (not too much fruit)

      4. Don’t eat sugar (worth repeating

      5. Don’t eat low fat. Get good fats into your body, MCTs great for energy etc

      6. Now time to do some exercise. Don’t go mad. Lift heavy every now and again, do some interval training, tabata etc. Walk. Lots of it.

      You’ll be thin in no time.

      But that kind of advice is very difficult to execute and is at odds with everything we are presented with, from ‘experts’ to the govt and food companies. Notwithstanding the fact that it’s flipping expensive!

      Anyway, that was a bit of an essay, I just feel i need to stick up for some fat people because it’s easy to lay blame at their doors when it’s just not that simple.

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      • Molly says:

        I’m sorry. I couldn’t get through the whole comment because I got hung up on your statement that nutritional information from doctors is more idiotic than information on the Internet. Really? Really? The Internet?

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  7. Kathie Clohessy says:

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