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.

TCB MD

There are a few core issues:

1) People are fat because there's currently ahuge profit motive in both the production and sale of calories.
2) From an evolutionary standpoint humans NEVER had abundant, easy to reach calories. High fat - you had to catch some creature swimming in the ocean. High sugar - in a tree or protected by bees. We are programmed to consume as many of these high quality calories as possible but that was for an environment very different from our current obesigenic one.
3) Scientist (yes I'm one) are wrong all the time, but that doesn't justify the nonsense perpetrated by quacks and corporations. Margarine over butter made sense until the discovery of the health consequences of trans fat. But the scientific truths are always more complicated than what the media or general public understand. In fact, nature even makes certain trans fats (milk, avocado, meat) that are GOOD for you (promote healthier lipid profiles and lean muscle mass) but that's a hard message to convey to a fairly science ignorant population.
4) Vegetable oil is another generic term of ignorance. There's a huge difference between corn/soybean versus olive. Not to mention our exceptional seed oils (flax/safflower/canola) but the government SUBSIDIZES the production of corn/soybean (bad oils).
5) Taxing simple sugars and unhealthy fats isn't a nanny state protecting us from ourselves. It would be government protecting us from a government-industrial complex (decades in the making), that NEEDS people to consume unhealthy foods to support profits. The same people professing limited government, personal responsibility tripe line up every few years to reauthorize the Farm Bill.

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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.

TexCIS

If it is costing "the government" for the poor choices, then it has already gone the "nanny state" route by paying for other people's poor choices. This state is a nanny who has spoiled the children by letting them eat anything they want, get fat, and make the "parents" pay the cost. In this case the "parents" are the people in society who are working to pay the bills and are making the right health care choices to not get obese and sick.

Any time a parent disciplines a child, it is "unpopular," and obese people don't want the discipline of paying their correct share of health insurance. As long as they cry long and hard enough about it . . . the "parents" will keep paying for their poor choices. Although in this case, the "parents" may not have a choice about it, because the kids can vote on it.

Kind of makes the responsible citizens into slaves of the irresponsible, doesn't it?

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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...

Enter your name...

Depends on where you live. I have lived in places that tax candy bars and apples both, and in places that tax neither.

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.

Eric M. Jones.

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.

Morten

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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Alex in chicago

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

There is an incentive

Ryan

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?

Michael

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 :-)

Ryan

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.

caleb b

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.

Paul M.

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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Joe

Just saw this..

http://articles.chicagotribune.com/2012-11-12/news/chi-cocacola-gives-3m-to-city-for-antiobesity-diabetes-efforts-20121112_1_coca-cola-lame-duck-session-fitness-classes

Seems topical.

Michael

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.

Joe

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?

Kathie Clohessy

Just one more small voice weighing in (no pun intended) on the lunacy. Taxing people for buying natural ingredients like sugar, butter and cream while filling them up with things like high fructose corn syrup, locust bean gum, genetically modified low cholesterol eggs (which taste like crap) and other GMO foods that have been proven-yes PROVEN-to cause cancer and birth defects in our cousins in DNA (lab rats) is freaking ludicrous!!! The real disease affecting American society is not obesity, it is greed. Our materialism has extended from our psyches to our stomachs with the unintended consequence of creating an culture that simplydoesn't know how to say "Enough is enough."

I say hooray for Colorado and Washington. They took a non-harmful substance that used to be illegal and made it legal to use. Now they can tax THAT, make lots of money and no one loses anything. A little common sense goes a long way.

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Bob Paul

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.

Michael

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

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.

Luke Allen

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?

Jan Johannessen

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.

KariAnn

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.

Kari

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.

Molly

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.