Are Fat Taxes All the New Rage?
The world’s first fat tax is finally here. Well, it’s not actually here (New Jersey’s Star Ledger Newspaper took the time to say “fat chance” to such a plan working in the U.S.), but it has been officially enacted in Denmark.
The tax applies to all foods that have a saturated fat content greater than 2.3%. The tax rate is 16 Danish kroner per kilogram of saturated fat (roughly $1.29 per pound). Danish officials expect the tax to generate somewhere between 1.5 billion and 2.75 billion Danish kroner annually. According to the Danish Agriculture and Food Council, a family with two adults and two children that does not change their eating habits can expect to pay an extra 1000 kroner a year (a little less than $200).
Interestingly enough, the goal of the tax is not to target obesity. The obesity rate in Denmark is 13.4%, which is 2.1% less than the European average. The last time the U.S. had obesity rates as low as Demark was in the 1970s. Instead, the fat tax is aimed at increasing the Danish life expectancy of 79 by three years over the next decade.
This type of legislation is not new for Danes. Denmark was actually the first country to institute a ban on trans fats in 2003, and last year the country instituted a 25% tax on sugary items like ice cream, chocolate and sweets. Sin taxes for soda, alcohol and cigarettes also exist. Advocates of these taxes note the benefit to preventative health and also the advantage of filling the government’s coffers. According to the secretary general of the European Public Health Alliance, Monika Kosinska,
“Denmark will not only increase general health amongst the population but will also ease the burden on the public health care system and increase its resources at a time of recession when [European] Member States are cutting public expenditure.”
Benefits aside, the criticisms of the new tax are numerous. In an article for The Atlantic, Edward Tenner notes the rich irony that Denmark, one of the world’s foremost producers of butter, cheese and bacon, is the first country to implement a tax on fat. Critics include, of course, the numerous producers of affected foods like butter, milk, cheese, meat and oil. One CEO of a Danish meat manufacturing company called the tax a bureaucratic nightmare.
Producers are required to pay the tax, and these costs will be passed on to consumers, suggesting that more Danes will shop abroad. Denmark’s central association of margarine producers (MIFU), has already filed a complaint with the European Union (EU) Commission arguing that the tax is noncompliant with EU free trade rules.
Other critics note that the tax may not be high enough to actually change behavior.
Given the similarity to soda taxes (previously discussed on this blog), it’s worth referring to a 2009 article published in the New England Journal of Medicine by Kelly Brownell and his team. They considered the public health and economic benefits of taxing high-sugar beverages and found that the 5% soda taxes that many U.S. states have enacted are too small to affect consumption. Their team proposed that a sugar tax on beverages would have to be much higher to lower soda consumption, at around 1 cent per ounce of beverage.
A 2007 study by the Forum for Health Economics and Policy focused on the ability of a fat tax to change behavior and found that a 10% fat tax on dairy would not reduce consumption by even one percent. The authors suggest that the tax rate would have to be much higher, but even a 50% tax may only reduce fat intake by 3%.
Some critics have offered suggestions on how to better address the problem both of obesity and shortened life-spans. Dr. Mike Rayner, Director of Oxford University’s Health Promotion Research Group, argues that Danes may switch from high fat foods to other unhealthy foods. He proposes that the overall unhealthiness of food should be taxed instead, not just a single nutrient. Simultaneously lowering taxes on fruits and vegetables could promote a healthier behavior change.
Dr. Yoni Freedhoff, medical director of the Bariatric Medical Institute in Ottawa, points to the public health issue of obesity as a societal problem. He notes,
“If we want to have legislation that deals with this problem, perhaps legislation that would deal with advertisement to children and zoning laws for fast foods around school would be a better place to start than a tax that is simply going to raise money and will not, in fact, change anything.”
NYU professor Marion Nestle finds the fat tax to be troubling for a different reason. To see individual behavior change, she argues that we must change the behavior of corporations “that make and market unhealthful products, spending vast fortunes to make them available, desirable and socially acceptable.” She cites a recent Lancet article on food environment factors that sees food processing, cost and marketing as drivers of consumption. She concludes, “[G]overnments seriously concerned about reducing rates of chronic disease should also consider ways to regulate production of unhealthy products, along with the ways they are marketed.”
Despite the multitude of criticisms, several other European countries have expressed a desire to follow suit– including France, Finland, Romania, Sweden, Norway, and even Britain. Americans should also be watching this social health experiment. But given that our country’s favorite condiment is mayonnaise, maybe the Star Ledger is right– it may not be time for a U.S. fat tax just yet.