Should There Be A Tax On Junk Food?

Amit Neuman- It is no secret, the United States has the highest obesity rates in the world. Obesity, without a doubt, imposes great costs on society. Obese people have a shorter life expectancy and impose a significant burden on health systems—costing more, on average, than smokers. Increased weight is associated with an array of fatal health problems; including heart disease, type 2 diabetes, and certain cancers. Obesity is responsible for an estimated 5% to 10% of total health expenditure in the United States, although some studies suggest numbers as high as 21%. Taxing junk food may not solve the issue of obesity in the United States, but it will likely curb the consumption of toxic foods—a step in the right direction.

Taxing unhealthy food products is not a new concept. In March 2015, the city of Berkley, California implemented a penny per-ounce tax on sugar-sweetened beverages (“SSB”). A penny per-ounce tax can be heavy. For example, if 2 liters, or 68 ounces, of soda costs $2.00, an additional $0.68 tax translates to a 34% increase in price for consumers. One year after the tax was put into effect, studies found that SSB sales in Berkeley fell significantly while untaxed beverages, especially water, increased. Some studies showed a reduction in SSB sales in Berkeley by as much as 21% and an increase in water consumption by 63%. In response to these studies, the American Beverage Association (which represents Coca-Cola and PepsiCo) has pointed out that the tax does not demonstrate a meaningful reduction in obesity. However, the low correlation between the SSB tax and obesity rates is most likely the result of obesity being so multifaceted. In other words, we shouldn’t render the soda tax ineffective because it didn’t entirely solve obesity—Rome wasn’t built in a day. Rather, the tax is doing exactly what is was set out to do, reducing the consumption of liquid sugar.

However, the issue becomes more complicated when trying to place a tax on junk food. What exactly is junk food? A regime imposing additional tax on food based on calorie count would be inefficient since not all calories are equal. For example, an avocado (high in healthy fat) may have more calories than some candy bars. A regime taxing broad food categories may help skirt consumption of unhealthy foods, but, like a calorie regime, would likely be over-inclusive capturing healthier products within the broad food category. According to Jennifer L. Pomeranz, a junk food tax becomes administratively feasible when placing a regulatory excise tax directly on food manufactures. Ultimately, the amount of excise tax would be determined by a combination of factors including food category, nutritional content, and sugar levels of foods produced.

As Pomeranz points out, these types of regulatory excise taxes are already imposed on products like tobacco and alcohol. Pomeranz looks to the imposition and rate of tax on wine for guidance. Per 26 U.S.C. § 5041, the higher the alcohol content, the higher rate of tax imposed on the wine per gallon produced. Similar to the level of alcohol content in wine, a regulatory excise tax on junk food can increase depending on a combination of the factors listed above.

Imposing such a regulatory excise tax would likely have several benefits. Manufacturers would have clear specifications of which ingredients and food categories correspond to higher tax rates creating incentives to alter and incorporate healthier recipes in their production. Food products that remain junk would be subject to the higher excise taxes, making it more expensive for the consumer to purchase, and likely pushing consumers to find healthier alternatives.

So . . . problem solved? Not quite. Steering people away from junk food is only one piece of the puzzle to a healthier country. Unlike soda, which was substituted with water in Berkeley, substituting junk food with healthier alternatives is probably not as easy—a separate topic for a future blog post.

Leave a Reply

Your email address will not be published. Required fields are marked *