Is A Fat Tax A Legitimate Source of Tax Revenue?
by Mark Riddix
Filed under Personal Finance, Spending and Saving, Taxes
I was reading an article today about how the governor of New York David Paterson is including a “fat tax” in the 2010 budget. According to the NY State Health Department, the fat tax proposed in New York would apply to all drinks that “contain more than ten calories per eight ounces, such as soda, sports drinks, ‘energy’ drinks, colas, fruit or vegetable drinks containing less than 70% natural fruit or vegetable juice, and bottled coffee or tea.” All full calorie beverages would see their prices increased a penny per ounce. Paterson is trying to cover a 7.4 billion dollar deficit in the state’s annual budget. Lawmakers estimate that a tax on sweetened beverages would raise about 450 million dollars a year.
So, what is a fat tax anyway? A fat tax is a surcharge applied to a product that is deemed fattening (food, beverages). Examples of fattening food products are cookies, cakes, pies, chips, candy, chocolate, burgers, pizza, fries, and hot dogs. Fattening beverages would be soft drinks, sodas, energy drinks, sugary fruit juices, and sports drinks. Surprisingly enough, a fat tax can even apply to a person! Any person with a BMI (body mass index) of 35 or above is classified as morbidly obese and could be subject to a fat tax.
The state of New York is not the only place considering adopting a fat tax. Many states are considering imposing a fat tax to plug budget shortfalls and keep up with rising health care costs. The state of Alabama has implemented a fat tax so that employees with a BMI of 35 or greater have to pay $25 per month more for health insurance. Whole Foods Market is offering employees discounts based on BMI. The lower your BMI is the bigger the discount at Whole Foods.
Other countries are following suit as well. Denmark, Romania and many European countries are seeking to reduce obesity by instituting fat taxes. Air France is charging a fat tax on obese customers that fly its airline. Obese individuals will have to pay for 1 seat and 75% of the cost for a 2nd seat. Fat taxes on air travel are expected to increase in the future. In the UK, obese people are being charged a fat tax after they die! Families are paying surcharges for coffins and cremation services.
Here are the pros and cons of a fat tax.
Advantages
1. It encourages individuals to reduce their fat consumption and eat healthier which will reduce heart disease, diabetes and strokes.
2. It will raise revenue for state governments and help shore up budget deficits. The additional revenue could be used to fund needed local services and programs.
3. It will significantly lower health care costs for states and companies. The extra savings can go towards employee wages and create more jobs.
Disadvantages
1. It is unfair to fat people and may be seen as discrimination.
2. It punishes corporations that have a popular product deemed unhealthy by the government (Coke, Pepsi, Nabisco, McDonald’s). This may lead to a loss of jobs at companies whose food products are deemed unhealthy.
3. It is more governmental regulation and taxation. An increase in taxes during an economic downturn is never good.
What are your thoughts on a fat tax? Are you for or against it? How would you feel if your state imposed a fat tax on you? Do you think that a fat tax has an effect on people eating healthier?
As for the taxes, I find the whole idea offensive. And I’m not fat, nor do I drink full-calorie drinks – which I avoid because I don’t want to get fat.
As for the airplane seats and whatnot, private companies should be able to charge you for the space if you take up the space that two people would take. If you use extra services or space, you should be responsible for paying for that service or space.
Milk is immune to this? I guess the key is “sweetened” beverage. Of course I’m against this, but if it encourages the use of beverages containing aspartame, it will be more costly than leaving soft drink drinkers alone. My opinion is that sweeteners such as aspartame are very bad for one’s health, and that diet soft drinks contribute to obesity as well as health problems. The only beverages we purchase are whole milk, bottled water, coffee and tea.
Fat people often use diet products and diet food. Non-fat people (at least the ones I see) eat and drink what they want, without supporting the diet marketers.
It would put an unfair burden on people who purchase cheaper foods. I’m not talking about sweets, but hot dogs and hamburger meat cost less than fish. Sometimes canned fruit is cheaper than fresh. So poorer people will get a bigger hit no matter what they weigh.
And where will it stop? If these things are government regulated, what’s to prevent other kinds of prohibitions? You have to develop infrastructure to enforce these new laws and once they’re in place it would take legislative dynamite to dissolve the departments, structures, and jobs involved. Government rarely gets smaller and more accountable.
why arent u talking about sweets when the article is… nobody said hot dogs and hamburger meat was going to be taxed…
(*were) going to be taxed
The land of the free is quickly becoming the land of taxation and absolute government control. If someone wants to buy a Pepsi, so what? This is America, I should be able to buy a soft drink without government slamming taxes into the equation. An extra 10 cents isn’t going to change habits anyway. What’s next, soda and fast food rations? Only 2 portions per month?
why r people so resistant to the idea in the first place, i admit that it probably wouldnt do anyone anygood economically considering past records of goverment spending of tax revenues… but the initial idea is not what we should be fighting, we should be trying to find out other ways on how to lower whole food costs while not taxing junk food and only punishing the poor. But one point I want to make is that america has an extremely agressive, selfish and greedy attitude… and apparently when it comes to food not just money…
To avoid it seeming so discriminatory, I prefer an incentive approach. Give me a discount on my health insurance if I maintain a healthy BMI or improve a bad one.
My employer puts an extra amount of money in our HRA/HSA accounts if we fill out a health survey that points out areas we can work on, if we join weight loss or quit smoking programs through our insurance, etc. It’s not cash to blow elsewhere, but it is definitely spendable for medical expenses and reduces out of pocket!
Our insurance also includes free gym memberships all over town. What a great idea! The program even gives ‘points’ to be traded for merchandise for every time you visit a gym. Any time an employee gets healthier because of these incentives, the employer’s health costs go down.
A preventive plan makes more sense than a punitive plan.
Oh, this is a great idea! NOT!!!!!!!
Once again, my “free country” is telling me what I should and shouldn’t do. Seriously, this completely ignores the freedoms set forth in this country. I agree with Amy, give incentives. Because this tax would not just harm fat people, but all people. Plus, I’ve seen many skinny people eat twice as much fattening food as I have.
In response to kyle, and anyone else who says: “this is a free country, I can do whatever I want” think about this: your choice to eat ridiculously unhealthy food means there’s a good chance that you and the millions of Americans like you are going to develop some serious health complications, costing the health industry billions of dollars each year.
Wonder where those costs go? They go to higher medical fees and higher insurance premiums. This means that I am going to end up paying for your bad choices. It only makes sense that we come up with some way to curb these habits and make the bad eaters in our country pay for the damage they’re doing to our public health system. Here’s an article that details a well thought out public tax on unhealthy food: http://healthcareoutsider.com/2010/03/how-to-pay-for-the-health-bill-tax-the-foods-that-make-us-fat/
Both of you are making valid points.
The rationale of this type of taxation seems to be that individuals should bear the costs their consumption choices force on society. Once this type of taxation is viewed as acceptable, it seems to be a slippery slope. If this is applied equitably to all groups, think where it could lead. If you choose to have children and I do not, why should I pay property taxes to support the public schools?? There’s a shot, a pill, a patch, an abortion or just keep it zipped. Children are a totally avoidable consumption choice where society is forced to shoulder much of the cost. The same is true of uneducated workers. Why should society pay for the fact they did not prepare themselves for the job market? Do we really want to go there?
You have a very interesting viewpoint on this issue.
First off, this is not a prohibition. No one is saying you can’t buy a “Pepsi” though I don’t know why anyone would when there are great tasting Cokes in the ice chest. Anyone can purchase the foods they want IF they can afford both the fat that comes with the food and the new tax.
The incentive idea is a great idea, lower my insurance premiums if I’m doing the right things and keep them high if I choose to gain weight, smoke, etc.
Speaking of smoking, how many people that now are against the fat tax actually voted for the cigarette tax? What people don’t see is that once you vote for one it opens the door for other things. When they started raising the taxes on cigarettes I knew that a fat tax was just a matter of time,, it was the next logical step. More people die from obesity than from smoking but yet smoking is taxed at a ridiculous rate here in California. We are being bombarded by commercials that pretend to show you the “TRUTH”. Where are the commercials that show you the “TRUTH” about fast food? How about a commercial that tells you the truth about cigarettes vs fast food?
I’m not saying that smoking is a good idea or that anyone should start smoking, but what I do know is that we tax what we don’t like but eventually YOU will be doing something I don’t like. Should I vote to fine you because this tax is basically a fine for doing those things that you enjoy?
Think about this, medical research shows that nicotine is an addiction, smoking is the only addiction that is taxed this way. What are you addicted to?
If we start taxing based on those things when will we start taxing people for every mile driven? Car crashes kill millions of people too! If I someone has a DUI on their record or speeding tickets will the DMV fees for a drivers license and car registration fees increase? That’s next my friends, if we keep this up we will pay huge taxes on those things that we enjoy as long as there is a possibility of injury or death.
Responsible voting is the only way. This nation is great because it listens to it’s people, it’s time to speak up and stop this ridiculous push to make this strong country into a soft one because we are too afraid of everything. We are losing control by our own hand.
You are exactly right, iio, and said it well. When you discriminate and practice extortion on one group of people (such as smokers), you are opening the door and encouraging exploitation of everyone. It isn’t safe to think either “That doesn’t apply to me”, or “It’s fine, because it didn’t come out of MY wallet” – because your wallet is next.
I love slippery slope arguments. “If we allow the government to levy taxes on people who consume unhealthy things, soon they’ll be taxing you for spitting on the sidewalk!” The government isn’t taxing (or considering taxing) something BECAUSE it’s addicting, they’re doing so because it decreases the burden on the rest of the taxpayers and draws more from the selfish people who hike up insurance premiums, medical fees, and taxes by killing themselves with unhealthy products. By the way, we absolutely should increase DMV fees for people with DUI’s. be careful with your replies, soon the government will be taxing paranoia.
I agree with your reply but where is the line? Is the line when it hits the things that YOU enjoy? I understand the argument and I understand the reasoning for the taxation but the real question is when have we gone too far? That question must be answered before we reach that line.
BTW, higher taxes do not stop people from doing those things that we don’t like, the smoking example still applies, yes smoking has decreased but it has not been eradicated. McDonald’s advertises on TV, cigarette companies can not and yet there are millions of smokers. The tax has done nothing to stop people from smoking only a personal decision can do that.
Higher taxes aren’t supposed to change behavior. They’re supposed to take more money from us. In addition, they do not decrease the burden on “the rest of us” because 1) Government cannot set priorities appropriately or be a good steward of the funds collected, and 2) The burden does not come from the people being taxed; it comes from those taking our money via taxation and foolishly dispensing it, as well as those who played the game taking educational loans and now charge prices that are 10 times what they ought to be for services rendered – so that they can pay off a large debt.
For the example of smoking, it would make sense to make it illegal if government doesn’t want people doing it. It would be a great thing to do that, because so many jobs in the tobacco industry would be lost, stocks for Altria etc would go down (even though they sell other products), crime rates would rise resulting from certain smokers no longer being “medicated”, and we could watch people die from cancer, heart disease etc who lived lives of abstinence and jogging. But don’t expect that the taxation and the encouragement of social disapproval of smokers to be a step toward making tobacco/smoking illegal, because that is not what it’s about. The money can’t be collected from dead people, either, so figure that one out.
Great point and that’s why I suggest that we no longer use the word TAX for this, it’s more a of FINE. Taxes don’t change behavior, but fines do, or at least they are meant to which is why I keep getting fined for speeding. =)
but being a dui is very lethal whether one enjoys it or not, i dont think that u have quite grasped the point of the initial idea of a fat tax. it is not to stop people from doing things they enjoy but other people dont like… it was just one possible way to wake up the nation, increase revenue for healthcare and maybe even subsidies for whole foods… though i do agree that fat taxes are just not the way to go about raising these funds…. it is a tax that depends on people buying the very sinful thing that the tax is trying to prevent being bought by consumers.