What is the best way to tax food?

We analyze how a sales tax levied on all food products impacts the consumption of healthy food, unhealthy food, and obesity. The sales tax can stimulate the consumption of healthy meals by lowering the time costs of food preparation. Moreover, the sales tax lowers obesity under more general conditions than a tax on unhealthy food (fat tax) and a subsidy on healthy food (thin subsidy). We calibrate the model using recent consumption and time use data from the US. The thin subsidy is counterproductive and increases weight. While both the sales tax and the fat tax mitigate obesity, the former imposes a lower excess burden on consumers.

It seems that if you try to tax fat directly, individuals can readily substitutes into other foodstuffs that are bad for them, or bad for their weight.  If you place a sales tax on food in general, individuals substitute into eating more at home, and there the food is healthier in the first place and furthermore the time-intensiveness of production will limit the number of dishes prepared and thus quantity and in turn obesity.

Here is the article by Zarko Kalamov, via the excellent Kevin Lewis.

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"We analyze how a sales tax levied on all erotica impacts the consumption of healthy romance, unhealthy s&m, and obsession."

Go on

You simply cannot accurately and scientifically define what is healthy food and what is not. The people who try are all biased and dislike or strongly like different things. None of the so-called experts agree. And science tends to show that barring a allergy or a specific health problem all/most food is good. Taxing food because you think it is bad is the height of stupidity.

Agreed that good/bad food is a false dichotomy. We can, however, evaluate health outcomes, so differences here count.

I also oppose food tax but my first concern is simply that it is enormously regressive, almost a tax on poverty. I would need to see a miraculously large difference in outcomes before I could support extra sales tax on food or specific foods deemed unhealthy.

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If there was very good evidence for what is and isn't 'healthy' food, then there may be a case for taxing the unhealthy food, personally I think the gov should keep out of peoples choices. However the evidence for what is good and not good is not very good and changes over time, to use that to punish people just seems wrong to me.

I can hardly wait until such Hostess products as Twinkies or their fruit pies are declared to be good in a healthy sense, as compared to good in a junk food sense.

The extremes are not really that hard to figure out, but there is no way that any company earning large profits from junk food are going to let those profits decline merely out of concern that Americans are growing increasingly unhealthy.

It was not that long ago that Snackwells were considered a health-food because they were low fat (and they are probably still considered more healthful than traditional cookies by many to this day)

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I agree. Don't tax food in any attempt to coerce consumers into healthier choices. And while we are at it, let's not subsidize health care costs. We should do away with health insurance and with any government subsidy for health care. You eat 15 twinkies a day for a decade, so be it. You can pay the price for the food. And you can pay the price for your resulting type-2 diabetes treatment. We are NOT all in this together.

Since none of us are immortal and eternally young we ARE all in it together and the grave is our common destination (ignoring religious claims of an afterlife). Some of us may die young from some sudden and massive trauma, but most of us will develop various degenerative conditions with age, if only due to the passing of time.

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California's "snack tax" creates a tax incentive for low-income people who receive food stamps that is the opposite of the intended incentive.

The state's tax regime says that the only food subject to sales tax is "snacks" (defined, roughly, as candy, chips, and soft drinks). But the federal rules for the SNAP program dictate that food purchased with SNAP benefits is not subject to sales tax at all, no matter what kind it is. Result: If you receive benefits it pays you to use them for your snack purchases.

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+1

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Yeah "healthy" and "unhealthy" food is nonsense in the context of obesity. You might be able to objectively define "calorie dense/poor", "nutrient dense/poor", but that's not necessarily going to get you going in a good direction either.

I think it would make the most sense to tax non-whole foods such that some food consumption shifts away from chips/soda/freezer meals/restaurants and towards home cooking. It'd still be tough to get right, though.

Is that really the rocket science you make it out to be? All and any fruit and veggies are healthy food, and you can eat as much as you can. With some 'shrooms of course known as poisonous, but you won't get those at a farmer's market anyway. Sweets and sugar drinks are bad, and you shouldn't eat or drink any, it destroys your cells. The rest is in between. You should especially moderate your intake of meat, prescription meds, there's a reason they're only available on prescription, and alcohol. Eating maybe one 8 oz steak, two if not at McD, or drinking a glass of beer a week is ok. Going full SuperSizeMe or funnel drinking every night at your fraternity is not.

Sweets can’t be bad. Sugar is the primary source of energy for humans. They are, however, are easy to abuse.

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"Sweets and sugar drinks are bad, and you shouldn't eat or drink any, it destroys your cells"

This is an example of how science never enters into discussions on food. Sugar doesn't destroy your cells. Your body runs on sugar and without it you would go into a coma and die within hours.

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A few American states, such as West Virginia, already have a sales tax on food. In WV, the rate is 5%.

Seems like a factual counterfactual to the entire premise, when paired with this from September 2019 - "West Virginia leads the nation in obesity rates among adults at 39.5 percent, up over 1 percent from the previous year according to a report from the Trust for America’s Health."

Prior once again fails to grasp ceteris paribus

At least he's stopped taking swipes at the moderators and GMU and Mercatus (because they started deleting him). Credit where it's due.

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A "fat tax" would be far from a tax on unhealthy food. A "sugar tax" and "processing tax" on food would possibly work better, though it would probably blunt some innovation. I doubt their "thin subsidy" was a targeted subsidy on foods with high fibre and water content either?

Fibre so underrated.

What about lean protein?

I feel like nutrition knowledge in America has deficits, in the same way that financial knowledge has deficits. You go to high school, college, head out into the real world and realize, oh shit, I don't know how to make food for myself. I don't know how personal finance works. And then you spend the next few years learning or you just never figure it out and become poor and fat.

...to teach that stuff in 'home economics' classes, but budget cuts make classes like that first to go.

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Each day after you go to high school you go back home. Parents have 18 years to teach you how to cook, do finances, how to behave around other sex, how to be fit and how to be an adult in general.

About 8 years, hard to teach a 5 year old about mortgages, sous vide, and birth control.

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"A "sugar tax" and "processing tax" on food would possibly work better"

Indeed. Fat is nutritious and satisfying, and most people would be much better off substituting butter for sugar, gram for gram.

"...butter for sugar, gram for gram..."

+1

It would change the world

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Fat has more than twice the calories of sugar per gram. How exactly is replacing "butter for sugar, gram for gram" going to help anyone lose weight? Is eating 200 calories worth of butter better for you than 200 calories worth of fruit?

Your body processes fat and carbohydrates much differently. Also, an increase in calories does not imply that one will gain weight (and a decrease in calories does not imply that one will lose weight). Lots of good evidence to support this. Try Jason Fung's *The Obesity Code* and Miles Kimball's blog.

You're right, for example fats are stored as body fat with almost 100% efficiency, whereas carbs are subject to de novo lipogenesis which causes 25% of the carb calorie content to be lost as heat when being stored as fat (Storage efficiency is near 100% when storing carbs as glycogen).

Make a more specific claim about calories not mattering if you want me to elaborate, dont just name drop some book or blog and act like you've proven your point.

The only functional way to lose weight is to consume fewer calories than you burn. Any diet that claims to do otherwise if just tricking you, for example by switching to a diet with low food reward.

It sounds like we are on the same page. Everything I’ve read on this topic points to insulin resistance as being the cause of obesity. The way to reduce insulin resistance is to 1) eat a low carb diet; and 2) reduce the time period during which any food is consumed (i.e. intermittent fasting; for example, eat all your meals within a 4-hour period).

See https://blog.supplysideliberal.com/post/2017/11/16/forget-calorie-counting-its-the-insulin-index-stupid

Anyone I know who has followed these principles has lost weight, sometimes significant amounts.

Regarding calorie counting, I say don’t bother counting calories because if you adhere to the principles above, you can eat however much you want and you will still lose weight. (Keep in mind that cutting the carbs will likely result in a reduction in calories consumed without an increase in hunger.)

To get back to the original thread you posed, I am fairly certain that eating 200g of butter will keep you fuller longer than 200g of peaches. Of course, you do need vitamins, but I suggest getting those from vegetables instead of fruits.

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In order for the tax to impact every obese person in the US, it's going to have to be high enough to impact the eating habits of the wealthy. That's going to be a really high tax.

The wealthy are generally far more in shape than the poor, so it really doesn't.

(Mr. Trump being an outlier)

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"If you place a sales tax on food in general, individuals substitute into eating more at home, and there the food is healthier in the first place and furthermore the time-intensiveness of production will limit the number of dishes prepared and thus quantity and in turn obesity."

An improvement of the working conditions on fast food workers would cause the same, right?....sorry not sorry =)

The really amusing thing is that American states already place a sales tax on fast food, compared to unprepared grocery food, which is either untaxed or taxed at a lower rate.

Thus providing another factual counterfactual to the entire premise.

.

This.

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You're rights. Food products (milk, eggs, vegetables, meat) are not taxable. Fast food and restaurants pays sales tax, thus.....more tax? How much considering sales tax is already substantial? Or leave it like that?

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If you tax Taco Bell, that's racist against Mexicans. If you tax McDonald's, that's racist against Scottish. If you tax KFC, that's racist against Kentuckians.

Actually, it would give the appearance of racism, which is far worse. Real racism doesn't seem to get nearly as much attention.

In fact reality doesn't get much attention any more, it is all appearance.

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If you tax any of those outlets, you're first and foremost a racist against fat people, severely pushing back against their hobby.

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Maybe one can combine two excellent ideas - increase the food sales tax while deregulating tree cutting. Not only will wildfires be reduced, but the people chopping down trees will get fitter as they work harder to pay for food.

Win-win.

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Just impose more stringent food production regulations and align them on organic standards. It will raise prices in a way that's more popular than through a sales tax.

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On a possibly substantive note on TC's summary, that may be a first-order consequence.

But it seems like a second-order consequence may be that business adapts over time to specialize more in "ready meal" processed food that is formally prepared at home, but has none of the constraints that result in home cooked food being healthier. Those are where people in control of their own food put less added salt, flavourings and "junk calories" into nutritionally often fairly suboptimal food in ways that increase palatability and profit, and where consuming a lot of variety also consumes a lot of time.

That's kind of limited by the limited quality of home ready meals relative to restaurant food, but technology could probably change this. Think about autochefs, which are probably going to get better and cheaper, to the point at which they do their job better at price than even low wage immigrants from places with rich food traditions.

There's also a question of whether this increases incentives to indulge in kind of "quasi-restaurant" activities, like food delivery and servants prepping meals in your home (currently marginal for poorer individuals but the structure of the service economy could change).

Although as said, I guess you could look at this through existing sales tax outcomes, but the outcomes may differ with a substantially increased tax.

This is not to say sales tax increases would not do anything, but seem like a blunt instrument that wouldn't help as much as they could and which second order consequences could undo, and which would have downsides restaurants as social meeting points and contact points (which they do serve as for the US's varied subcultures; small towns, immigrant communities, hipster urbanites, etc), damaging the US's already loosely knit social fabric. (Social engineering of diet may have negative social engineering effects on culture).

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Did Mike Bloomberg drop a recent donation here? Enough with the social engineering.

Mr Cowen has stated numerous times that not everything posted here carries his endorsement. I have my own theories regarding why he posts things that would be contrary to his thinking but you can come to your own conclusions on a post by post basis.

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Fruits, vegetables, raw flesh, and a number of other foods have no tax. Other foods, including what's generally termed "junk food" has a 10% tax. This is basically just an accident from a government attempting to get their 10% Goods and Services tax passed.

The effect is minimal because Australians are so rich they tend to eat what they want and damn the 10% GST tax. But it does appear to have some minor benefit with regard to health. How much is hard to say as we forgot to organize a control Australia before implementing it.

I probably should have mentioned that Australia's previous sales tax regime acted as an inconsistent junk food tax as well. The tax on flavored milk was punishing.

'Sugared Milk' [artificially flavoured]

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Are the authors making a distinction between groceries and prepared foods? Many states exempt groceries from the state sales tax but impose the tax on the sale of prepared foods (whether sold in a restaurant or a grocery store). What's considered "prepared foods" isn't always clear, but generally it means food that is ready to eat and doesn't require additional preparation. One may have observed that many grocery stores are selling more prepared foods, that either are already in ready to eat containers (the food not the container) or have to be shoveled in supplied containers by the hungry customers too lazy to prepare their own meals at home. I have observed these hungry customers chomping away as they walk across the parking lot, too hungry to wait until they reach the safety of their cars before filling their fat stomachs - walking while eating requiring the skill of multi-tasking. Since many states impose the state sales tax on prepared foods but not groceries, doesn't that encourage eating at home and discourage eating in restaurants, or am I missing something here? [An aside, the term "groceries", which qualify for the sales tax exemption, is not anything purchased in a grocery store, as some states tax soda, alcoholic beverages, candy, and other items not considered "groceries".]

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I doubt fooling with food sales taxes would substantially affect obesity rates. Chicago has very high citywide taxes on candy, soda, and restaurants, yet obesity rates in schoolkids vary widely across different neighborhoods (less than 15% in some areas, over 30% in others). There are a lot of cultural, environmental and socioeconomic factors in play here, and I think even obesity "experts" are at a loss to come up with solutions.

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Maybe displaying a picture of an amerifat on the envelope of sugary food will scare consumers like cigarrette labels of sick smoker patients

The fat acceptance movement would sue for bias.

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So we are now supposed to be evaluating taxes based on whether they result in healthy patterns of food consumption or not? Well, what a waste of time! If you want to use the tax code to make being unhealthy illegal, then forget about the sales taxes on food and instead just tax fat people directly. You'll certainly end up with fewer fat people that way.

If the idea sounds offensive - and I agree that it does - that's only because it does what it says to do: taxes people for being unhealthy. Food taxes are, I thought, supposed to raise public revenue. But if what we're really after is forcing people not to be fat, then the economically efficient way to do that is to go ahead and tax fat people, not fat behaviors.

RPLong is correct. If you’re going to treat people like children then do it to their faces. Don’t hide it and hope the people you want to listen are paying attention.

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Doesn't seem economically efficient; you'd need some kind of structure to measure peoples and body fat % weight. Seems like that kind of weight assessment methodology would cost more than you'd get back, even if factor it into the tax. Maybe you can do it efficiently from photographs in this day of neural network image processing? I bet that would still contravene someone's idea of civil data rights though (people on here were freaking the fuck out about police accessing the DMV's record of photos, for the purposes of preventing and solving crime, for'ex).

Also acts after the fact. Taxing fatness through taxes on goods places burden on producers and pre-consumption choices and can avert them. Taxing weight does not, or at least does so less effectively. It is also confounded by metabolic variation. Like suggesting you tax poor lung and cardiovascular health rather than tax cigarettes.

We already have reliable ways of identifying fat people, and I am already required to provide my Social Security Number to my family medical practitioner. The infrastructure exists. If closing the loop seems like a breach of civil or human rights - and I agree that it does - then it's worth questioning whether the IRS should be put in charge of enforcing public health initiatives. But if we're not raising that question, then just tax fat people for being fat already.

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“ It is also confounded by metabolic variation.”

It also works the other way. Some people metabolize sugar easily and they aren’t fat. Taxing their sugar intake is wrong. Just like taxing moderate drinkers to pay for alcoholics. If you think being fat is wrong, then that’s the incidence you want to tax.

In general for alcohol it works the opposite way - it's the Asians and SE Europeans with non-functional ALDH variants who are less likely to become alcoholics. Probably the case for sugar as well - not metabolizing sugar well (think diabetes) probably makes you less likely to consume.

But in any case, why would it be any more morally wrong to tax people who have a metabolic advantage due to no effort of their own but exhibit the same behavior? Taxing people on their chosen behaviours is generally seen as more just than taxing people on their genotype (whatever we really think about how much of a role "choice" really has in consumption behaviours).

I don't get where you guys are getting this "If you think being fat is wrong" from. It's kind of not about thinking something is morally wrong and then taxing them as a punishment, it's more about trying to implement a preventative incentive against something which is generally harmful. And morally you can discuss the oughts of that (should the state even be doing that? will it even work?), and have this fine Libertarian debate about this, but this is a distinct thing.

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In the NY area food -- ALL food that arrives by truck -- has already been taxed to death via the huge bridge and tunnel tolls trucks must pay. The consumer is the one ultimately paying those tolls, above and beyond what it might cost them to drive to work.

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State capacity nannyism.

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After SinglePayer is implemented in the US it will be fun watching Democrats fall all over themselves debating if fried chicken and watermelon should be taxed as unhealthy consumption. I already know how some commenters here would view the subject.

Watermelon's actually very healthy, just a little misguided. Maybe by the end of the movie it'll dump fried chicken and get together with a really nice food

It'll just hook up with its sidepiece, waffles.

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Why is it that the solution to every problem is higher taxes?

Because We The People cannot come up with any better solution. Other solutions such as rationing, education and prohibition have all been tried, they don't work as well.

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US percentage of GDP collected as tax revenue in 2000 was 28.3%. In 2018 it was 24.3%.

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These taxes/subsidies should be considered way earlier in the food value chain. Removing subsidies on empty calories and increasing spending on R&D for healthy foods can make a big difference in prices and producer/consumer behavior.

+1

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Would a high tax on unhealthy food turn that unhealthy food into a status symbol? What if donuts became as expensive as caviar? You'd probably start to see the average dessert, sausage-infused breakfast platter, or sugary drink become a lot classier to match the higher price.

Also, as others have commented, not all humans are the same. A person with a family history of heart disease vs. a person with a family history of diabetes have completely different ideas of what is healthy.

For example, a tax on low-carb, high-fat foods may be a net positive for people with heart disease but a net negative for diabetics. I suppose people could get tax exemption licenses based on their health risks.

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