Time For A Fat Tax: Obesity

Obesity has been a growing worldwide problem for the past three decades, especially in European countries and the United States of America. Between 1980 and 2004, the prevalence of obesity in Europe and the USA doubled, from 15% to 32%. At the moment in Britain, most adults are overweight and one-third of all Americans are obese (Yaniv, Rosin Tobol, 2009).

All over the world, one billion adults are overweight, 300 million are obese and 17.6 million children under five are considered to be too heavy for their age and height (Smed, Jensen Denver, 2007). A person is classified as obese when his or her BMI is 30 or more.

The Body Mass Index, a measure of body composition, is calculated by taking a ratio of weight in kilograms to height in meters squared. The higher the outcome, the more overweight a person is. In contrast, a ‘healthy’ person is classified with a BMI within the range of 20-25 and someone with a BMI of 25-30 is classified as overweight (Leicester Windmeijer, 2007).

Why is obesity such a problem? In the first place, it is because obesity is a key determinant for many chronic conditions and it is considered to shorten life expectancy to a remarkable degree.

Our changing dietary habits are leading to chronic diseases, which makes obesity a social problem. Chronic conditions which are influenced by obesity are high blood pressure (hypertension), type-2 diabetes, heart and lung diseases, cerebrovascular diseases and several types of cancer (Yaniv, Rosin Tobol, 2009).

It is expected that the number of afflicted diabetic people will double the upcoming years. By 2025, in developed countries, 370 million people will be diabetic and 75% of all global death rates will result from heart diseases (Lavrance, 2009).

Secondly, overweight causes not only somatic, but mental problems as well. According to Gregory et al., (2006) it has been linked to other mental health problems such as depression, anxiety disorders and other psychiatric disorders.

Data from this study also suggests an association between obesity and low self-esteem, feelings of shame and guilt and feelings of inadequacy. Therefore, obese people are at increased risk for social isolation. It is reasonable to believe that obese people are targets of teasing and verbal abuse and that these people suffer from discrimination, for instance in workplaces (Gregory et al., 2006).

Furthermore, obesity is an economic problem. Among developed countries, obesity accounts for 2-6% of the total health care costs (Smed, Jensen Denver, 2007). In the United States of America, the costs of obesity nowadays amount to at least 117 billion dollars each year. These costs are borne by governments, health care organizations and insurance companies.

These data represent only direct medical costs, such as health care services related to obesity, including surgery, medication and treatment of complications (Yaniv, Rosin Tobol, 2009). In addition, as a result of loss of productivity and income losses due to morbidity and mortality, true costs are believed to be much higher.

There are also indirect related costs, including chronic diseases associated with obesity and costs due to exercise programs and dietary modifications. These indirect and related costs are borne by employers and the obese individuals themselves (Yaniv, Rosin Tobol, 2009).

In conclusion, in all European countries, overweight and obesity are major health problems.

They are risk factors for social, personal and economic problems as well. It is believed that this growing trend of obesity is likely to continue. An instrument that is believed to stop this growing trend and reduce overweight and obesity and the consequences named above, is a ‘fax tax’. A fat tax is based on the assumption that when the price of goods goes up, consumption of that good lowers. The idea of a ‘fat tax’ has been supported by several public health organizations (e.g., the World Health Organization) and governments in various countries (Smed, Jensen Denver, 2007).

According to Yaniv, Rosin Tobol (2009), bringing in a fat tax can be done in two ways: “1) by taxing foods according to the percentage of fat they contain and 2) by taxing foods that are fattening and unhealthy, mainly junk or fast food (e.g., French fries, snacks, pizzas and soft drinks (Yaniv, Rosin Tobol, 2009)”.

However, only a few papers have addressed the influence of a ‘fat tax’ on specific food and drinks that cause overweight. The question arises if a tax on specific food and drinks that cause overweight, called a ‘fat tax’, could stop this trend? Or does it only affect specific groups in society? This essay analyses the effects of using a fat tax in Europe and the USA as an economic instrument to reduce overweight and obesity. It is hypothesized that a ‘fat tax’ would not reduce obesity or stop the growing trend.

A ‘tax’ for fat people:

The study of Yaniv, Rosin Tobol (2009) shows that current medical costs as a result from obesity rival the costs that are attributable to smoking. Is it time to bring in fat taxes on food and drinks, to improve the health of the population? Lavrance (2009) suggests that a fat tax is more effective than public health campaigns which are used nowadays. In his opinion, cigarette consumption has reduced over the past ten years as a direct consequence of raised tobacco taxes.

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Another argument Lavrance (2009) comes up with, is that a fat tax would probably help to redevelop the budgets in health care in the same way the tobacco taxes have been doing. But does the tobacco tax really work that well? Each year, five million people are still dying as a result from smoking tobacco, particularly people who are used to live in low and middle income countries (World Health Organization, 2011).

Furthermore, while drinking alcohol is becoming more and more expensive, the consuming alcohol rate is roughly the same or higher than a few years ago in European countries. These counter-arguments are show that such social problems are too complex to simply state that a tax is the most effective and efficient way to improve health in society.

Another point of view is that the implementation of a fat tax, in contrast to taxes on tobacco and alcohol, is not as easy as it seems to be. Fats can be classified as saturated and unsaturated. Not all fats are the same. We can conclude that different types of fat have different effects on people’s health.

To exemplify, butter contains unsaturated fats that increases the level of good cholesterol. In contrast, some dairy products such as cheese, may contain high levels of saturated fats, which increases the levels of bad cholesterol (Chouinard, Davis, LaFrance Perloff, 2007). This makes it hard to decide which products must be taken into account for a fat tax. In other words, who would decide ‘what is fat’ and ‘what is unhealthy’.

Obesity as a society problem:

Another argument for bringing in the tax, is the fact that an unhealthy lifestyle of one citizen, including fat eating and minimal exercise, imposes economic burdens on the rest of society, for example tax-payers or employers (Smed, Jensen Denver, 2007).

Leicester Windmeijer (2007) believe that “a fat tax can be used to influence individuals choices in a way to bring the outcome closer to the socially desirable standard”. A specific tax on foods that contain too much fat aims to discourage unhealthy diets for people who could not, or would not, make that choice by their own. Some people in society already accepted that people who are too overweight to fit in one seat of an airplane, should have to pay more for the same flight, so it stands to reason that these people must pay for consequences in society too.

Mann (2008), however, is wondering if there is any possibility that the social costs of obesity are not as high as one might think. In addition, a closer look at the health care costs show that there are also ‘positive’ social effects of obesity.

Overweight and obese people die earlier than people of normal weight and therefore are shorter dependent on health services. If a fat tax changes the unhealthy lifestyle of obese people into a healthy lifestyle, it will probably have an impact on society. Presumably, these people would live longer, which makes them in their elderly days more dependent on health services.

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More important, what about people that are underweight, such as anorexics, and therefore need medical help? In contrast, there are obese people who never use medical care in their life. Besides that, what about all other groups in society who impose economic burdens on the rest of society? After asking ourselves these questions, we see that there are also some discriminatory issues in the case of implementing a fat tax.

On the other hand, if we tax something that is unhealthy, preventing more people from buying it, it could lead to more than one positive effect. A side effect would possibly be that food producers will make their products significant healthier, which is an advantage for the whole society. Nevertheless, if these food producers are punished because their popular fat products are labeled as unhealthy or fat, this can also lead to loss of jobs and unemployment at these corporations as a result of less income. Above all, a tax on fat foods or products will also affect people who already have a healthy lifestyle. Everybody will be taxed in the same way, so the whole society – including the poor, elderly or people that need to eat extra calories sometimes – are paying more for these products, not only obese or overweight people.

More than a rational choice:

The idea of a fat tax enjoys growing support by the World Health Organization, governments, in public health services and in insurance companies. A study of Schroeter, Lusk Tyner (2007) utilizes a microeconomic model to investigate the impact of price changes on body weight. This study shows us that when a consumer has to make a choice between two complementary products, a high- and a low- calorie food, a tax on high-calorie food leads to weight decrease. Several other models are suggesting that a small tax lowers intake of fat in such a way that is profitable for the modern society.

In contrast, experimental research data from Chouinard, Davis, LaFrance Perloff (2007) suggests that a 50 percent tax lowers a fat intake by 3 percent. They used a supermarket scanner data to estimate the effects of taxing the fat content in food products on different demographic groups. Their conclusion is, that elderly and poor suffer the most from welfare losses. For example, a family earning 20.000 dollar a year or a household containing only seniors, suffers nearly twice the welfare loss of a family earning 100.000 dollar a year or consumers who are younger than thirty.

Also, the paper of Schmidhuber (2004), which analyzed currently discussed policy options to reduce body weight, shows us that almost all price interventions are likely to be efficient, but only for poor and elderly consumers. Obese and overweight people are the least responsive to increasing food prices and therefore will not alter their consumption pattern.

The paper of Yaniv, Rosin Tobol (2008) addresses the fat tax within a food-intake rational-choice model. The results suggest that for a non-weight conscious individual a fat tax will undoubtedly reduce obesity. More important, the results show that for a weight-conscious individual, especially when this person is physically active, a fat tax may increase overweight. This is because the weight-conscious individual will cook more at home with healthy ingredients and will become less physical active, as a result of the reduced time due to the time spend on cooking (Yaniv, Rosin Tobol, 2008).

Besides all named above, there are more factors that influence individuals choices and development. How individuals become obese depends on individual considerations, based on the information one has about side effects of obesity, the amount of this information, considerations about costs and about the benefits (Mann, 2008). Environmental factors are also important in the development of overweight and obesity, such as the family or environment in which a child is growing up and the place of work. Besides that, there is also an genetic component involved in the development of obese, which raises the question if we could punish people for that fact.