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. Bob Paul says:

    How about a real fat tax? Every year each of us could be weighed and our BMI measured. The fat tax could then be assessed based on a person’s excess body fat. I know it sounds absurd, but I’ll bet Michael Bloomberg would be all for it.

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    • Michael says:

      Except BMI tells you very little about one’s health, I have a stupidly high BMI but very low body fat percentage. For many people BMI is just not a realistic way to measure obesity or health.

      Plus I have to side with the overweight a little, they are a product of a system that pushes processed foods at them, that encourages people to get fat, that allows the big food companies to get away with clearly disingenuous practices and advertising. Only today I saw that Pepsi is releasing a drink that claims to Leo people lose weight. Companies like that should be closed down.

      So I do have sympathy, people don’t have the right food education (see a post earlier and the likes concerning how butter is bad for you because of the fat content), food companies are incredibly good at filling their foods with chemicals that induce you to buy and become almost addicted, their marketing is, for want of a better word, genius and all this is encouraged by the government.

      People often argue that the public has choice. I don’t think it has as much choice as people believe. I think it’s very difficult to live healthily when the food companies use science and psychology (and politics) to win you as a customer.

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      • James says:

        I think the BMI thing is true for a lot of us (men, anyway) who do serious exercise, and so carry rather more muscle mass than the typical semi-sedentary person for whom it was designed. But it’s a pretty fair first cut – if you have a high BMI, check to see whether you have washboard abs, or the excess weight collects around your waist and jiggles.

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    • IndieGir says:

      I’m a woman who lifts weights as part of my workout routine. I have a BMI of 26, but a body fat percentage of 23%. Why should I pay a penalty when a woman with a “normal” BMI has a higher body fat percentage? Or, for that matter, why should even body fat percentage be considered an indicator of health? I know a rather rotund lady from the gym who runs marathons and is still overweight. Your weight says nothing about your health.

      Now I’ll go get a cup of tea while I wait for the all the inane responses that will tell me 1) I’m not typical and there aren’t many people in my situation, most other people who are overweight are unhealthy, 2) I’m really unhealthy and just deluding myself, and 3) Gary Taubes says to stop exercising and eat fat and you’ll live forever . . .

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  2. Luke Allen says:

    I have a question….

    Is there actually clear evidence that raising the taxes on consumer products such as cigarettes, alcohol, fatty foods etc actually reduces the publics intake of said items?

    I ask because in Australia (where I live) the government places large taxes on alcohol and cigarettes and says it does it to help the public’s health… but it really just seems like a cover for massive revenue raising.

    Anybody shred any light on my concerns?

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    • Jan Johannessen says:

      People tend to respond to economic incentives and demand tends to be elastic to price. Booze is hardly a Giffen good. Of course smuggling and bootleg alcohol will undermine the effect somewhat. In Europe where a national border is rarely far away, smuggling will be more of an issue than in Oz.

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  3. KariAnn says:

    I think food reform in the US should start with the food the government is buying. Food stamps should be reformed to restrict purchases to healthy food. This could be especially beneficial because people on food stamps are more likely to be on Medicaid and we are paying for their health needs too.

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  4. Kari says:

    I think food reform in the US should start with the food the government is buying. Food stamps should be reformed to restrict purchases to healthy food. This could be especially beneficial because people on food stamps are more likely to be on Medicaid and we are paying for their health needs too.

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    • Molly says:

      I’ve thought for awhile that food stamps should be like WIC — you know, you can only get specific things with them. I haven’t fully thought it out, but if you could buy baking goods, bread, peanut butter, milk, cheese, produce, etc., and not candy, ice cream, chips, soda, and other processed food, I’d be much happier about paying for other people’s food. Even if it cost a little more because produce ain’t cheap, for the calories anyway.

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  5. RMR says:

    Setting the economics aside for a moment, the other challenge here is that it is basing a tax on shaky science. Dietary fat isn’t bad for you unless you’re pairing it with simple sugars (sugar, carbs) that induce your body in to storing it instead of burning it. If you want people to be healthier, tax sugar and white bread.

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  6. janvones says:

    How bout we tax liberal blowhards at 100% of income, on all spending, and 100% on their estates? That way they can actually do something to help the rest of us for once. Or would that be unconstitutional?

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  7. Jan Johannessen says:

    Norway has for decades imposed special taxes on sugar, carbonated drinks, chocolate, tobacco and alcohol and (rather bureacratically) tailored agricultural subsidies based on perceived heath benefits. It is paternalistic, but it nudges behaviour in a healthier direction. Some negative externalities and curtailed. People respond to incentives. Few people object to the marginal dollar of tax revenue coming from taxing sugar instead of, say, collecting more payroll tax.

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  8. Dennis L says:

    The book “Why we get Fat” should be required reading before the debate. The books calls attention to the possibility that “calories in calories out” is a symptom and not the cause and the reason Atkins works so well. All carbs are the problem. Not fat.

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