Taxing Obesity

Economics

This article from yesterday discusses a new study by the British Medical Journal that says a 20% “fat tax” could result in a significant decrease in obesity. We know that taxing alcohol and cigarettes raises prices and reduces consumption — perhaps not as much as some might like, but it works. So why not tax cheeseburgers? If you know me or my blog, you know I’m a libertarian and I’m against taxing people to try to get them to behave the way you want them to. The solution is not to make getting fat expensive; it’s to make people pay the costs of their own obesity. (And health care reform that allows people to get care even with pre-existing conditions like diabetes and high blood pressure only makes the moral hazard problem here worse, but I’ve already written enough about that.) So given that the nanny state wants to take care of us, and every time someone gets sick they cost their neighbors money, we need people to eat healthier.

Fine. I want people to eat healthier. If we’re all in the same boat, I would love it if other people didn’t weigh so much when I’m on that boat. But what surprised me this woman’s comment that was included in the report:

“I’d pay 20 percent. It’s worth it,” one woman said. “I would eat a lot more healthy just to save more money.”

Think about this for just one second. This is a woman who already has the option to eat healthy food. We all do. I THINK about getting a donut on the way to work almost every day. I actually change my route to work so I can go by Walmart just so I have the option of stopping in really quick. I give in to that craving about once every two weeks, and when I do I only get one. The rest of the time, I have a protein shake and a banana for breakfast on my drive to work. It’s boring, it doesn’t taste nearly as good as a few donuts would, and it’s more expensive. But I do it to stay healthy.

This woman has the same options and could choose the healthier options, but she chooses not to. Why not? Because a) bad food often tastes better, b) bad food is almost always cheaper, and c) she either has little money or little willpower. Unless one of these 3 things changes, she will likely continue to eat the way she already does. And because of that, we have to now tax unhealthy foods (to change condition b) to force her hand. But what gets me is that she thinks she’s going to save money.

I’ll let the BMJ’s study speak for itself and stipulate that it will actually decrease obesity. But the two follow-up questions I have are:

1. Is it worth it economically?

2. Should this woman actually WANT her bad food taxed (which it appears she does)?

In regards to #1, a friend of mine from graduate school has written several papers about the economic effects of Walmart. This one shows that even though access to cheap food through Walmart makes us fatter, and does increase health care expenditures as a result, those higher health care costs do not completely offset the savings from food. In short: we are fatter and happier.

In regards to #2, and saying this as politely as I can, I don’t think she’s thought this all the way through. Suppose she currently has the option to buy healthy food for $8 or unhealthy food for $5. She goes for the fatty food and saves money. If we tax her fatty food and make it more expensive, the logical conclusion from not only the BMJ study but also this woman’s own words is that she will buy more healthy food and less fatty food. But when the demand for healthy food goes up as everyone starts wanting more of it, the price of healthy food is going to rise. That price differential is likely to stay close to the same, only instead of her choice being between $8 and $5, it will be between $9 and $6. In terms of the 3 reasons she currently doesn’t eat healthy food (a, b and c above), NONE of those changes. And she will have even less money to spend on other things because all food is now more expensive. So after all is said and done, she pays a dollar more to eat healthy than she would right now, and she actually thinks that’s a good thing!

This is the equivalent of the government taxing imported cars so that people will buy American cars, and people who currently don’t buy American cars say they welcome it because it will get them to buy an American car, which they feel they should be doing anyway. It’s just those darn imports are either better or cheaper. They don’t realize that when the demand for American cars rises, the price also rises and they end up paying more for that American car they didn’t want in the first place. If you think you should be buying an American car, just DO IT! If you think you should be eating healthier or exercising more, just DO IT! You have the choice now and the terms of that choice are better when the government stays out of it than when they try to influence you to make the “right” decision.

With reasoning like that, I guess I see why the government assumes they know better than we do about what we eat and how we treat our bodies.

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2 Comments

2 Comments

  1. Susie Xanthos  •  Jun 22, 2013 @1:31 pm

    We have all fallen into the “pleasure trap” and it’s hard to get out. It’s hard to make good choices because there is no immediate gratification in making them. Some people have learned to mentally consequate their choices and see down the road. They have learned to avoid the traps and eventually have a better, more productive life.

  2. Diane  •  Mar 9, 2014 @2:33 pm

    Are you still reading messages from June of last year?

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