NCPA - National Center for Policy Analysis

FATTY FOODS TAX

September 5, 2006

Health-conscious groups like the American Medical Association and the Center for Science in the Public Interest want to heap higher taxes on sodas and fatty snacks to encourage people to eat better and generate money for health promotion campaigns.

They believe taxes on fatty foods should follow in the footsteps of other "sin taxes" on products like tobacco, beer and booze.  Sin taxes are often perceived to be win-win:

  • The tax is only paid by those who engage in socially undesirable behavior such as smoking, drinking or eating fatty food.
  • If people quit to avoid the tax, they -- and society -- are better off.
  • Sin taxes also have proved to be a politically safe way for state legislatures to increase state revenues without triggering a voter backlash.

The trouble is, says Matthew P. Moore, senior policy analyst at the National Center for Policy Analysis, families with lower incomes tend to spend a greater share of their income on "sinful" products, and thus bear a larger proportional burden when taxes rise. 

  • For example, families earning $13,500 spend four times the share of income than families earning $80,000.
  • While taxes on fatty foods are likely to reduce consumption among the poor (because they are more responsive to price increases), those who don't are worse off because they're paying higher prices. 
  • Yet those who do reduce consumption are considered worse off because they can no longer afford to purchase something they want.

Smoking, drinking or eating fatty foods is, after all, a choice, says Moore.  Why should the government have a role in people's choices about smoking or eating, anymore than it has a role in what car you buy, whether you skydive or what brand of soap you use?

Source: Matthew P. Moore, "A tax on fatty foods will hurt lower-income households," Arizona Daily Star, September 5, 2006.

 

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