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. Mphatso says:

    I strongly believe the fat tax experiment by Denmark was a good one but maybe it was misunderstood.Generally taxing fatty foods is a very good idea like in africa where most fatty foods are viewed as luxuries.Such a tax will have little public outcry since the they have elastic demand.

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  2. John says:

    It is cheaper to eat junk than healthy. Why? Is it a lack of taxes? No!

    The US Fed Gov’t subsidies drive down the cost of corn production. (http://en.wikipedia.org/wiki/Agricultural_subsidy)
    Many food additives are corn based. (High Fructose Corn Syrup etc.)

    A gov’t caused problem doesn’t need a gov’t fix. Treat the root cause instead of they symptoms.

    Get rid of gov’t subsides that already steals $billions from the citizenry.

    Get rid of the artificial market conditions created by farm bills before further manipulating the market with taxes.

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  3. Josh Leath says:

    What about an income tax structure (or insurance rates) based on BMI or body fat percentage?

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  4. Maddie Harris says:

    I think the state should increase education to families on cooking easy simple yum healthy meals, part of the reason people resort to eating fast food is the cheap price and greasy marketing but also the ease and quick service, when you’re hungry you want to eat now right not wait to search up a recipe and boil vegetables. SO maybe an educational programme offered by the state that raises awareness and enforces the concept that eating healthy can be just as easy, better for you, taste nicer, when you’ve got the know-how.

    Maddie.

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  5. Eric says:

    My main problem with a “fat tax”, is that at least according to the food pyramids and dietary recommendations we see all the time, the government has no idea what makes people fat. A huge part of obesity is related to processed grains (grains being the bottom level of the pyramid), whereas things like coconuts, salmon, and avocados have high levels fats and are arguably very healthy for you. Olive oil is another healthy fat that would potentially be affected, and therefore discouraged.

    It seems to me a tax on fatty things will encourage people to eat more processed carbs, thereby exacerbating the problem the same way the “fat is bad” marketing did in the 80′s and 90′s (which is apparently still affecting things now). Low fat ice cream was one of the results of this campaign, and many people immediately thought “Fat free? I can have as much as I want and not get fat!” Eating a cup of pure refined sugar is “fat free”, but will certainly fatten you up if you don’t control your intake. Don’t even get me started on the awfulness of margarine and “I can’t believe it’s not butter” compared to real butter…

    [WORDPRESS HASHCASH] The poster sent us ’0 which is not a hashcash value.

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