Junk Food Tax

Junk Food Tax

It is socially sanctioned, media attractive, and loved by just about every health authority (and self-proclaimed health authority) in the land. The “junk food” tax is seen as a means of generating revenue and a way to get people to stop eating their favourite treat.

Community support
Many people for a long time have requested a food/fat tax of sorts. A survey in the US last year found that three quarters supported a tax, yet two out of five said that a tax wouldn’t change their eating habits. A report from the Economic Research Service of the United States Department of Agriculture in 2004 concluded that a small tax “is unlikely to have much influence on consumer diet quality or health”. Of all the groups suggesting a fat tax in the US, the report found that none had specified how they would use the extra funds to improve eating habits or food choice.

Here in Australia, Access Economics produced a 2006 report that estimated the direct cost of obesity to be $3.8 billion, with nearly half of this due to lost productivity. In the report, they claim that the idea of a “fat tax” is flawed. A broad tax on certain foods doesn’t target obese people and assumes that obese people overeat only taxed foods. The tax also assumes that a higher cost will shift consumption away from certain foods towards healthier foods. Access Economics use the example that having virtually free tap water has not shifted consumption away from soft drinks and fruit juices.

What to tax?
Even if you did tax certain foods, on what would you base the tax? Fat? Saturated fat? Salt? Sugar? Or combinations of these components? If it was a fat tax, then it may include oils (100% fat) and nuts (50-80% fat). But hang on, you say, they aren’t junk foods. So how do define a junk food? One that is high in saturated fat and salt may be your answer. If so, then cheese is a junk food. OK, you didn’t mean cheese, you meant potato chips. What about high sugar drinks like soft drinks? Well, they have the same sugar content as pure fruit juice. Should we tax juice? You will notice that anyone proposing a food tax never, ever defines what to tax, most likely because their thinking is based on an emotional argument and not a practical argument.

What level of tax?
If you wanted to enforce an additional tax on a food, what level should it be at? On this next comment, I am speculating. What if a $3 serve of fries attracted a 50% tax to take it to $4.50? If that did change sales, and I doubt it, the fast food outlet might just decide to use a poorer quality cooking oil and take a revenue-neutral or small-loss stance and sell them for $2.00 instead. Add the 50% tax and you have a $3.00 serve, the same price as before, only now with more cholesterol-raising potential. Who is the winner here? As I said, I am only speculating, but it is a definite possibility. McDonalds has twice changed its cooking oil in the last four years to reduce saturated fat levels. Love them or hate them, it is the right direction to head.

Another option
Rather than taxing foods, in may be more productive to offer tax incentives to food companies to encourage changes to their recipe formulations. Food companies in Australia and New Zealand have made concerted efforts to reduce sodium, saturated fat and trans fats in the food supply. The Heart Foundation tick program each year has removed 235 tonnes of salt from the Australian food chain and over 35 tonnes from the NZ food supply, compared to pre-2002. Margarine manufacturers virtually deleted trans fatty acids from table margarine around a decade ago. Maybe food companies are a lot like children – they respond better to encouragement than regular beltings.