Taxing the Random

It is hardly a novel idea, but one that is worthy of at least some discussion: Tax the unhealthy stuff in our food.

Last Thursday night, during my lecture on economic and foreign policies in the American Government course, I proposed the idea of providing health care to everyone in the country -- either by assisting citizens in buying private policies or by providing universal health care, pick your preference -- by taxing food based on the ingredients that are causing the various health complications in this country. This is based on the logic of supply and demand. Currently, in this country, 'junk' food is cheaper than food that is good for our bodies and thus our health.

I'm not suggesting that we only eat tofu for every meal -- I've yet to be convinced that tofu is (a) really food, and (b) entirely good for humans.

What I am suggesting is that if junk food were the same price as or more than the wholesome foods, perhaps the demand for junk food would go down. The supply would never entirely go away, but perhaps it would be naturally curtailed and be considered more of a luxury item rather than a necessity it is currently be perceived as by American society.

How we go about achieving this transformation is through a tax on the harmful ingredients. This has been proposed before, with very little success. The so-called "Twinkie Tax" didn't make it much beyond the press blitz that politicians engage in to make the populace think that something is being done. In 2009, the Center for Disease Control and Prevention reported that 67% of Americans were overweight -- half of those, 34% of the total, were obese. An additional 6% were extremely obese, for a total of 73% of Americans having a Body Mass Index of 25 or higher.

It was believed by many, inside and outside of this country, that the reason why Americans are so overweight in comparison to the rest of the world is that we eat too much. Yes, we do -- too much junk food. It is easy to see how the general perception of our overeating was created. Not too long after moving to this country, a friend was treated by La Professora to a dinner at a restaurant. The friend -- I'll call her Miss M -- had been warned by family and friends in France that she should be careful, that living in America would make her fat. So, to prevent this, Miss M ordered a salad. When the salad arrived, her eyes become huge -- to match the size of the plate of greenery. We ate and chatted, and ate some more. It soon become clear that Miss M was no longer enjoying her salad, but was continuing to eat it. I pointed out that if she was full, she could take the rest home in a "doggy bag" -- thus introducing her to yet another Americanism. She wondered at the idea of taking the extra home -- in France, one only orders that which one can eat at the restaurant -- so I explained that Americans like the idea of getting "value" for their money. What that means for the discussion here is that in the mind of American consumers, lots of cheap junk food is better than a little good food at the same price.

Thus the way to get Americans to eat better is to give healthy food more appeal, pocketbook-wise. Even the most liberal of Americans would howl at the idea of more farm subsidies, which totaled $7.5 billion last year -- in 2005, the total was $16.4 billion. If farm subsidies for the producers of healthy food is out, then taxation for the producers of junk food should be considered.

The aforementioned proposed Twinkie Tax was for a 7 to 10 percent tax. The idea was based on the 'sin' tax on cigarettes. Driving up the price, it was believed, would cause people to think twice before purchasing the sugary, fattening food they crave. That low tax might not be enough, but it certainly would be more effective than some sort of subsidy. In a recent edition of Psychological Science, researchers exploring the question of taxation versus subsidy found that women who did the grocery shopping would buy more healthy food, as measure by a calorie-for-nutrient value, when the unhealthy food was taxed at either 12.5% or 25%. On the subsidy side, the researchers found that when the price of the healthy food was lowered and the unhealthy food remained the same, the women would buy some of the healthy food and then 'spurge' on the unhealthy food with the money saved on the healthy -- thus not decreasing the number of overall calories.

The researchers' methodology of measuring the calorie-for-nutrient value seems a bit complicated, but it did show a change in consumer behavior. The proposal I gave my students last week was much more simpler than the CFN calculations: tax by percentage of the Daily Value.

The federal Food and Drug Administration plans to cut down on the amount of salt that the average American consumes by setting limits for the various foods. This is both too complicated and prone to fudging as the various industries lobby to set their own limits. The fact that the trade group representing the soda industry spent $5.4 million in the first three months of this year to keep lawmakers from limiting exposure of sugary drinks to children is evidence that the various food corporations do not have Americans' health in mind.

No, the solution is a tax based on the amount of the Daily Value percentage for sodium, sugar, and fat listed on the Nutrition Fact label on each item. Take the label for a generic bag of barbeque potato chips to the right. The total sodium percentage of the Daily Value is a whopping 62% and the total fat is a mind-blowing 99% -- eating one serving of 7 ounces of these chips means that the rest of the day's food must be truly fat-free and nearly sodium-free. In my proposal, this 99¢ item would be taxed at 161%, raising the price to $2.58, which would give pause to even the most drugged out pothead with the munchies.

Exempt from the tax would be foods that are not processed beyond the necessary sanitation and packaging. Dairy products such as milk, cheese, and yogurt would be exempt; meats that are merely butchered and packaged would be exempt; fruits and vegetables in their natural state, either fresh or frozen, would be exempt.

Now comes the question of how much would such a tax raise to help cover the cost of health care. Colorado is considering ending the 2.9% sales tax-exemption on candy and soda. It is believed that doing so would increase state revenue by $17.9 million next year. That's just for Colorado, imagine how much would be raised across all the states at a much higher rate than a mere 3%. Maybe, once everyone has health coverage, we could start paying down the national debt too.

Of course, when everyone starts to avoid the high priced junk food, there would be less tax revenue for the health care coverage plan. Instead, the increase in better eating would mean that more people would be healthier and thus cutting down on the need for costlier health care coverage. A win-win around the political spectrum.

For those on the right who decry such a taxation policy as an infringement on personal responsibility, I say that this is hardly the case. The government would not be telling people what they can and cannot eat, rather it would be putting a more immediate cost on choosing to eat unhealthily. Further, it would create more jobs. Yes, as demand for the processed food decreases, jobs in the automated food processing plants would go down in number. However, jobs at farmer's markets and industries providing healthier food would increase. Likewise, healthier people are 3 times more productive, taking far fewer sick days, and making significantly fewer errors on the job. More productivity means a better economy, which in turn decreases unemployment.

Everyone wins from a healthier diet. Just don't expect La Professora to eat tofu.

Image credits: http://www.cdc.gov/nchs/data/hestat/overweight/overweight_05_06_fig2.GIF
http://fantasyhealthball.files.wordpress.com/2008/03/nutrition_facts_label.jpg