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!


Baughman

The US insurance system causes obesity. It's too easy to be obese, with the associated high costs of medical care, because the obese person doesn't fully internalize the cost of her obesity. In other words, she imposes an externality on the rest of us.

The solution: internalize the externality. Make health insurance what it was intended to be: protection against catastrophic loss. High deductibles will make people more aware and more responsive to the costs they incur. Insurance premiums should be tied to waist size, much like they consider in the US life insurance market.

Jens F!

Denmark has universal health care, paid exclusively tax, with no deductable. As such, a fat-tax is a way of making obese people pay the cost for being obese.

Michael

One of the biggest problems is that the tax is flawed as it focuses not on sugar but on fat, nor does it distinguish between different kinds of fats. Some fats are good for you. Butter, bacon, coconut (very high in sat fat) these are all very healthy items. Why should they be taxed?

Conversely sweets are awful for children's health, as is corn, corn syrup, barley malt etc.

The problem is that govts don't want to target these because they are so economical, subsidised and have massive lobbying power and even your basic can of tomato soup would be taxed.

I we want to protect children from obesity we need to first understand the real causes, these are not 'fats' (fat doesn't make you fat) but sugar and corn syrup etc. As such any tax not focused on the real enemy (sugar) is a waste of time anyway.

Stephen

Please show footnote authority for "fat doesn’t make you fat".

I get:

Fat: 1 gram = 9 calories
Protein: 1 gram = 4 calories
Carbohydrates: 1 gram = 4 calories

Michael

Fat in itself doesn't make you fat, overeating it will. (just as overeating brocoli will) Furthermore looking at fat from a purely calorific standpoint is over simplistic and misleading. You need to look at what happens to the calorie once ingested. Take your example above, 10 cals of fat from say coconut cream is completely different to 10 cals from a sugary drink.

Gary Taubes is a nice source for this, calories do count of course but the type of calorie counts just as much. As of course does gut health, inflammation, insulin response etc.

I'd be happy to test this with you. You take in 2500 cals from pasta, sugary drinks, sweets every day and I'll take the same in from coconut, butter and bacon without exercise and at the end of the year we'll see who has the six pack. And who looks like death.

So no, healthy fats are good for you and they don't make you fat. So go enjoy that bacon, butter, animal fat, coconut milk, heavy whipped cream and live your life to the full. Just hope that Govts the world over who have no idea about nutrition and health (hence how obese everyone is even though they go to the gym more than ever before and follow Govt health guidelines) trey to tax health foods on basic misunderstanding.

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Joe

Crossing my fingers for that podcast.

David

The line that jumps out at me is: "Danish lawmakers will slightly raise income taxes and reduce personal tax deductions to offset the lost revenue."

So was the point of the tax to encourage better eating habits, or to get scrounge for money by going after a "fat target" that was thought to be socially acceptable to attack? If the tax does work to modify behavior, then the tax revenues will drop over time (as well as income tax on profits from the fat producers and sellers), and if they've gotten used to that money, then either the rate goes up, or there's a new target, and the cycle continues.

Mike B

A fat tax should not be intended to prevent obesity,but to societal cost of obesity. It is never in government's best interest to go down the nanny state route to protect people from their own choices, however the government should seek to recoup the societal costs of personal choices. If that cost recover helps make people make better choices then so much the better.

Dani

OK I'm sorry but no one has stated the obvious in reply to this comment so I suppose I will:

I'm completely with you on the "some fats are good for you and not all fats are created equal" mantra. Eating an avocado or using olive oil, both of which contain healthy mono and polyunsatured fats is very different from eating a candy bar and far better for you than consuming lower fat but processed items.

That being said, BUTTER AND BACON are HEALTHY??? I can hardly wipe my jaw from the floor. I can't think of any two items more likely to cause heart disease and expand your wasteline! I'm sorry but if you consume 2500 calories of bacon and butter as you suggest you will look like death at the end of a year.

You completely contradicted yourself by saying the gov't doesnt understand differences in fat and what causes heart disease and then offering 2 items laiden with heart attack causing saturated fat which you seem to think is harmless.

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Michael

:) Tell me how butter and bacon cause heart disease? Let me quickly preempt that by assuming you're going to talk about saturated fats and cholesterol. If so....

It's not true. Most people suffering heart attacks have low cholesterol. I could point you to plenty of sources but this is a decent one http://newsroom.ucla.edu/portal/ucla/majority-of-hospitalized-heart-75668.aspx

This is a very interesting article from a highly renowned heart surgeon on the matter, definitely worth reading:

http://www.sott.net/article/242516-Heart-Surgeon-Speaks-Out-On-What-Really-Causes-Heart-Disease

People like chris Kresser can give you plenty of info on this. http://chriskresser.com/heartdisease

Robb Wolf is another source http://robbwolf.com/2009/10/29/cholesterol-we-are-dumb/

If you're not talking about cholesterol and high saturated fats causing heart disease and there's another method then sorry for the above and go ahead, I'll try and answer that.

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Jim

we already have a 'fat' tax since most basic foods (milk, bread, butter, coffee) are sales tax free in the grocery store. while most 'prepared' food (tv dinner, take out) is taxed.

anyways we are fatter than ever and living longer than ever...

Bjorn Roche

Seriously? We subsidize foods like corn, artificially reducing the price of corn syrup to below the price of refined sugar, and then we want to tax fatty foods? That's insane.

Steve Nations

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.