Christopher Pang
Fat tax, Slim hope
When this news of an ongoing consideration of a “fat tax” was announced, it sounded like a joke in a stand up routine. But it seems like the British Prime Minister, David Cameron, is seriously considering an obesity tax similar to the one implemented in Denmark whereby a surcharge is imposed on food with higher level of saturated fats.
What is a fat tax?
A fat tax is a surcharge placed upon fattening foods, beverages or individuals, with the objective of discouraging unhealthy diets and offset economic costs of obesity. There have been studies suggesting a high correlation between eating behavior and price as compared to nutrition education. However there are also contrasting evidence that obese individuals are less responsive to changes in price of food than normal-weight individuals. Figures also show obesity levels are far higher in poorer homes, areas of high unemployment, poor education and bad housing.
Libertarian view
Many people might think the government is implementing this tax for “our own good”. However, should the state be using taxes as deterrence on society to not drink soft drink, eat Kentucky Fried Chicken or measuring our waistline annually to tax us? Some might argue the government is not stopping us from consuming such foods/drinks but only shaping our consumption patterns through taxation. The question is “Should the government be allowed to in the first place?”
If the government is allowed to implement a tax for “our own good”, what is there to stop it in the future that they will implement a tax on heavy metal music which they find damaging to the eardrums, or escalator/lift tax because walking up the stairs is a healthier option? Would Cameron then consider taxing people who do not run 3 times a week? As absurd as these ideas might sound, it might be implemented one day if we continue to let our government micromanage us for “our own good”.
A fat tax is regressive because low income households are more likely than wealthy households to eat fatty fast food and have less access to fresh and healthy food. A fat tax hits the poor harder than the rich. In a simple hypothetical example, junk food which cost $6 a meal now cost $8 a meal after tax and cost of healthy salad cost $10. It would still be more economical for a poor fellow to indulge in junk food as it gives him more calories per dollar spent. The higher calorie intake would enable him to last the entire day of work. If his pay was $4 per hour, he would have to work an hour more each day to pay for tax difference for both lunch and dinner or be $4 worse off. This 1 hour of sacrifice could be from exercising or could be from his social time. The poor man is still consuming the same junk but with one hour lesser of leisure time every day, making him worse off than before, and possibly increasing likelihood of obesity.
Root cause of the problem
How should the problem of obesity be tackled then? It seemed at first glance that obesity is the root cause to the rising healthcare costs. However the root cause of this problem is socializing healthcare in the first place, which results in an individual’s irresponsible choices. As the cost of one individual’s decision on consumption falls upon the society with medicinal socialism, the individual will not feel the penalties of his value judgments as the cost is fixed for everyone whether he behaves appropriately or not. Individuals should be responsible for their own choices. The poor man who consume junk in the short term without considering the long term consequences should bear the responsibility of his own health deteriorating and eventually his medical bills. His irresponsibility should not be society’s responsibility.
Governments may call this a “fat tax” but it is in reality another government scheme to take more money out of the hard pressed taxpayers. What we choose to eat is not the government’s business. The primary objective of setting up a government in the earlier years was to defend our individual rights and civil liberties but ironically today our governments are the biggest entities that oppress our rights and civil liberties.
Photo courtesy of the TheHuffingtonPost.com
What about taxes relating to alcohol and tobacco consumption?
Guess the same arguments apply…
I was going through the same question in my mind. If governments are not socializing healthcare, then definitely the same reasoning applies because individuals have free will to decide what they want to consume and bear the consequences of such irresponsibility. There is however a difference between junk food and liquor/tobacco consumption. You can mitigate some of the negative effects of junk food through exercise and you would not be as addicted as compared to the latter.
Furthermore, junk food has a calorie intake which can be more useful in the short run for people who burns alot of energy through manual work, which mostly comprises of poor people. This cannot be said for tobacco and liquor which serves no other purpose other than pleasure.
CP
You forget that alcohol does serve a purpose in temperate climates where it is drunk for people to keep warm. Further, prior to water treatment, the only way to drink safe water was beer.
regards
Sheer stupidity when more studies are now showing that saturated fats aren’t responsible for obesity…
On the other hand, some even suggest that saturated fats are protective against heart diseases…
Obesity could be due to overeating of normal food or/and lack of exercise, and not necessarily junk food or foods with high saturated fats. Some nutritionist was suggesting to tax fatty food and subsidize healthier products (http://www.nytimes.com/2011/07/24/opinion/sunday/24bittman.html?_r=3). The self interest is evident because he is selling nutrition recipes for vegetarian products.
@ajohor: I acknowledge that point is valid in less developed cities. I think the reference was to developed cities in this instance and most developed cities should have no issue with keeping warm or finding clean water.
I think fat tax is good but it must be introduced with good compulsory public education about diet. Fast food is not cheaper than normal healthy food. I can cook a relatively healthy meal from ingredients from the market or supermarket using less much than the cost of a happy meal in McDonalds. When I was a student in England, it was the same too. You can spend a few pounds to buy economy burgers and frozen chips (which is what some people say poor people may like to eat). You can also spend the same to buy veggies and some pork thighs for a stir fry to eat with rice. I am not even talking about organic food.
One thing many libertarians forget about smoking, drinking and unhealthy food is the cost of medical care subsequent to consumption. Why should those who bother with their diet and lifestyle pay for those who don’t or why should society accept that the added burden to shared national medical resources? They want to consume these things, they pay for the after care. Education will not be easy and will take time but it is a step in the right direction. We can see how difficult it is from Jamie Oliver’s efforts to bring good diets to school dinners in Britain but those who were converted will always be grateful. I say please don’t forget to count the medical costs to society of a poor diet and lifestyle.
Hi Christopher, an interesting and thought provoking article there.
Another dimension of the tax explores the possibility of substituting more healthy cooking alternatives to prepared food. However the tax as it is proposed currently would pass the cost on to consumers of food with high fat content, which is presumably unhealthy and a cost to society. The assumption here is that the tax, at some magnitude, would change consumer and business behavior.
After years of tariff hikes on tobacco in SG, its impact on smoking is not well known, but tax proceeds remain significant. Has it stopped people from smoking? Or encouraged Big Tobacco to offer ‘healthy alternatives’?
Considering how healthcare is not socialized in SG (as far as I am aware of), do you think there are reasons why libertarians like yourself think a tobacco tariff can be justified, yet a fat tax in any form should not be?
‘It’s my life, and my money’ no?
@Dennis
Medical cost to society is only a factor when medical is socialized. In a libertarian standpoint, as long as you do not infringe or coerce others against their free will and respect the individual rights to freedom, life and property, no one should be bothered with what you want to do with your life. I am against socializing medical care or even subsidizing for that matters.
@Jonas
I think this “junk food has a calorie intake which can be more useful in the short run for people who burns alot of energy through manual work, which mostly comprises of poor people. This cannot be said for tobacco and liquor which serves no other purpose other than pleasure.” has been misunderstood to be justifying what the government is doing. I am just acknowledging that it makes more sense than a fat tax comparatively but still a coercive tax under a libertarian view.
@Christopher Pang
As a matter of principle, I can totally understand what you have said from a pure libertarian standpoint though that is not what I entirely subscribe to. I can agree with it to some extent. There is a cost to society and where do we draw the line when resources may be limited. Is it fair to those who do not impose on the limited state resources by their wilful insistence to take risk with a certain lifestyle? A pure libertarian approach does not solve certain problems from this perspective but at the end of the day, we still have to deal with the problems of limited resources. Increasing tax revenue by other means is also not a fair method to others too.
@Christopher
Perhaps I was unclear in my earlier comment. I am actually in agreement with the gist of your article and hope you might apply a little more consistency to parallels. Please bear with my lengthy comment.
If you can reasonably put a number on the cost of healthcare to obesity-related ailments, and it happens that healthcare is socialized (being provided by the state), I think such an arrangement can still be justified as a means to cover the shortfall of providing healthcare to such persons on the basis of fiscal prudence. Similarly for the case of diseases related to the consumption of tobacco and alcohol.
However, in the event that the cost of healthcare is fully privatized (cost governments little or nothing from the fiscal budget), whether fat tax, tobacco tax or otherwise, how can such taxation be justified? Where is the quid pro quo?
Government intervention of personal life may be achieved in several ways other than taxation, which I acknowledge many of these programs are not cost effective.
However when you made a distinction between tobacco and ‘fatty food’ (by suggesting that there is utility from junk food when it provides efficient calories), I think you implicitly acknowledge that society ought to penalize ‘anti-social’ behaviors (by taxing them disproportionately), which curiously is what libertarians are arguing against.
@ jonas
I do not see the need for putting numbers because the fact that the government is taking from one person’s pocket to pay for another person’s medical bills itself is wrong. Whether that person whose pocket is being picked is rich or can afford it is irrelevant to the nature that this should not be his bill.
The cost of healthcare can be fully privatized and people should expect less from their governments, jobs, healthcare, regulations, housing etc. Therefore on that count alone, most forms of taxation cannot be justified
“you made a distinction between tobacco and ‘fatty food’ (by suggesting that there is utility from junk food when it provides efficient calories), I think you implicitly acknowledge that society ought to penalize ‘anti-social’ behaviors (by taxing them disproportionately), which curiously is what libertarians are arguing against.” This was made on a premise that healthcare is fully paid for by the state as in the example which is UK. By fully paying for healthcare, it will result in reckless behavior to continue irresponsible anti social behaviour which is being paid by society instead of themselves. I am against the state socializing healthcare in the first place, which is the underlying premise that you think I am arguing against.
“The poor man who consume junk in the short term without considering the long term consequences should bear the responsibility of his own health deteriorating and eventually his medical bills. His irresponsibility should not be society’s responsibility.” I am implicitly suggesting that healthcare coverage by state should be scrapped totally and everyone should be responsible for his consumption, drinking or smoking habits.
To illustrating my last comment, an example would be the payment of road tax. If I pay road tax to access public roads using my motor vehicle, I should reasonably expect the government to maintain the road conditions for motorists. Similarly if I have to pay a ‘fat tax’ or a tobacco tariff, it follows that I should expect something in return from the government. Otherwise it is an inequitable penalty and infringing on my personal liberty. In an earlier comment, I quipped about a fully privatized zero socialized scenario where a ‘fat tax’ or a tobacco tariff cannot be justified on grounds that the individual is penalized and gets nothing in return from society, which sought to impose its collective will on selected individuals.
A ‘fat tax’ is understandable and not fundamentally wrong when society provides healthcare. I do not think it is fundamentally wrong because it “takes from one person’s pockets to pay for another person’s problems”. Besides in this case it appears untrue. A ‘fat tax’(tobacco tariff) takes money from the junk food consumer(smoker) into the coffers of the government, who foots the bill for healthcare. Hence there is ostensibly no third party paying for an ‘irresponsible person’ who indulges. He who indulges, pays the price today for society’s cost of providing healthcare in the future.
However you made a good point regarding moral hazard should there be a comprehensive system of healthcare coverage be socialized. It is possible to consume limitless healthcare, and a comprehensive coverage of healthcare is somewhat like a blank check.
However if we close the discussions here, left leaning liberals and libertarians will not be on the same page. If poor people have the tendency to eat junk food because they cannot afford healthier options (still an unproven conjecture), is it right that they be denied: 1) the ability to earn enough to afford healthier options, and 2) the related healthcare remedies or preventive measures to halt the self-inflicted health conditions from consumption of junk food with high fat content? Perhaps businesses may be encouraged to provide healthier options to the population to deal with the legislation.
In a fully privatized zero socialized healthcare scenario, there is no mechanism to alleviate or remedy the inequality in the system. Imperfect as it is, even a stopgap solution may be better than ‘do nothing’ as you suggested.
“A ‘fat tax’(tobacco tariff) takes money from the junk food consumer(smoker) into the coffers of the government, who foots the bill for healthcare.”
1. Whether or not the government uses the money collected to fund for healthcare
2. It is a tax and not a fund because it does not fund the person directly. The tax could be collected but healthcare policy could change in the future after this tax is collected. It could change to a subsidy for healthcare or total privatization of healthcare, leaving the person who consume junk with paying more tax and even less for his personal healthcare in future.
This is also the reason why I am against governments for most taxes of similar nature.
“If poor people have the tendency to eat junk food because they cannot afford healthier options (still an unproven conjecture), is it right that they be denied: 1) the ability to earn enough to afford healthier options, and 2) the related healthcare remedies or preventive measures to halt the self-inflicted health conditions from consumption of junk food with high fat content?”
There are 2 different studies which shows varying results on poor people. I am just making an assumption because in either case, whether they consume more or less, the governments should not be involved in shaping our decisions. I am just suggesting a hypothetical situation which could result in harming poor people more in the short run.
And in another case which is typical of someone who has his own personal “comfort food”, varying from potato chips, chocolate, ice cream, fast food etc, he might not be obese but just derive “comfort” (otherwise known as utility to economists) from consuming of such food products. So why make his “comfort food” more expensive, just because the government thinks it is bad for us to consume?
In both situations, what the government does is to take money from one group of people (junk food consumers) to fund another group of people (healthcare consumers). There could be a common group of people who both consume junk food and healthcare but also another group who consume junk but not healthcare, as in the case of the comfort food consumer. This is the group which is being penalized by the government because the government “believes” that they would belong to the same group who consume the healthcare. There is another group which is consuming healthcare but not consuming junk food which is being taxed. This is the group which gains the most out of it.
“Perhaps businesses may be encouraged to provide healthier options to the population to deal with the legislation.”
There are other things which distort the food market, which is the subsidized farming for certain commodities, such as corn, and these commodities lead to prices of livestock being cheaper than it would have been without subsidies. It gives farmers in livestock/corn an unfair advantage against other farmers without such subsidy. This could also be one of the reasons that contribute to junk food prices being cheaper than it should be.
The “do nothing” proposition will always be attacked by common folks, deeming me and other libertarians as inhumane or unfeeling. This is probably the best article I can find on why governments should get out of providing healthcare. http://www.lewrockwell.com/paul/paul585.html
I think I am starting to understand you, even if I do not agree with the premises leading to your conclusion.
A digression from our discussions, I am somewhat acquainted with Ron Paul’s stance on fiscal prudence, which became popular before Obama got elected (pre global financial meltdown). When you have conservative Republicans calling for ‘tax cuts to get more tax revenues” and progressive elements calling for ‘spend money to create more money’, it is no wonder ‘do nothing’ sounded hauntingly alluring.
I do not live in the US, so it would be difficult for me to comment with sufficient depth on the situation there. Similarly for the ‘fat tax’ in the UK, although I can agree with you in principle. What you hope to achieve in penning this article, I believe, was to demonstrate that socializing healthcare does not mean people do not have to pay. Assuming fiscal prudence, you suggested it has to come from increased taxes, like the ‘fat tax’. In the comments section, it became clear that you believe socializing healthcare is unfair for everyone, because a ‘fat tax’ would not have been implemented if healthcare was not socialized.
Well… I would like to draw your attention to a little speck of dirt off the tip of the Malayan Peninsular, where tobacco tariffs have been implemented for many years with little or no healthcare costs borne by the state (read: it is mostly privatized). This casts a shadow over your assumption that socializing healthcare would lead to more of such taxes being implemented. I am suggesting that new, ‘innovative’ taxes can be implemented regardless of whether healthcare is socialized. It has more to do with the cost of running a government, as opposed to ‘size’ of government (I am making a distinction here because an administration can be small, costly yet provide unsatisfactory service standards and policy outcomes).
Finally someone always loses out from a policy change. ‘Physically fit comfort food eaters’ from a ‘fat tax’, or ‘poor people genetically disposed to heart conditions’ from not being able to afford treatment in a fully privatized zero socialized healthcare scenario. If I frame it such that a few Häagen-Dazs aficionados who refuse to pay their taxes, are denying patients in critical conditions who cannot afford the cost of treatment, then it is not your unfeeling attitude, but rather the intellectual absurdity of your view that leads to a bizarre outcome.