NCPA - National Center for Policy Analysis

A FOOD TAX? FAT CHANCE

August 9, 2005

Politicians everywhere are looking for ways to fatten up sagging budgets, and Australian lobbyists and policy experts have an idea: a fast-food tax, says Jordan Ballor of the Acton Institute for the Study of Religion and Liberty.

This "fat tax" is really the newest incarnation of the sin tax; it would place a 50 percent tax on fast food, raising the consumer price of a Big Mac from $3.25 to $4.88. Supporters believe that fast foods, which tend to be higher in calories, fat and cholesterol than other types of foods, are unhealthy, therefore, they are worthy of special government attention, says Ballor.

So why shouldn't Australia attempt to promote healthy behavior through taxation?

  • The state's interest in promoting healthy behavior quickly becomes contradictory when sin taxes are introduced; if such activities really are so harmful, government should not have an economic stake in their continuance.
  • Indeed, government budgets, in seeking the short-term crutch of sin taxes, can quickly become dependent on them for long-term viability; the state's interest would then be to promote rather than inhibit such activities.

Even though quick-service restaurants have an unhealthy reputation and are an easy target for regulation, the truth is more complex, says Ballor:

  • Franchises that have put an emphasis on providing healthy foods have done well in Australia, which saw a 123.2 percent growth in new Subway outlets in 2002.
  • The service industry has responded quickly and efficiently to customer demands.
  • Australians spend nearly 37 percent of their food and beverage budget on dining out.

The new plan will ultimately fail, says Ballor, because of the difficulty in differentiating types of dining and distinguishing healthy menu items. Moreover, sin taxes are quick fixes that could have serious economic and moral consequences and they are not really appropriate when applied to food and drink.

Source: Jordan J. Ballor, "A food tax? Fat chance," Melbourne Herald Sun, July 19, 2005.

 

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