Denmark Levies First-Ever Fat Tax, Should the U.S.?

  • Share
  • Read Later

Dennis Gottlieb / Getty Images

A country populated by people whose nationality here doubles as the name of a sugary breakfast treat is probably the last place you would expect to take on fatty foods. But that’s exactly what’s happened. This week Denmark became the first country in the world to levy a tax on fats. Danes will pay an extra $0.12 at the register when they buy a bag of chips, or $0.40 for a hamburger. And that’s raised the question of whether we should try it here.

Fat taxes have in fact been tried here. But only by state and local governments. Former Curious Capitalist Barbara Kiviat wrote about the fight over soda taxes last year. The biggest knock on fat taxes is that they don’t really make people healthier. According to our sister blog Healthland, one study found that soda taxes did little to make people healthier because many of the overweight are already drinking diet soda. And as our recent cover story on what to eat points out, it’s really not fat that is the villain in our diets. It’s calories. Tax one type of food and people will eat too much of something else. What’s more, it’s not even clear taxes would get people to eat less fat. Studies show you would have to dramatically increase the cost before people stop buying ice cream and other fatty foods.

(MORE: Beating Butter: Denmark Imposes the World’s First Fat Tax)

Blogger Matt Yglesias, however, says this is a benefit of a fat tax and not a failing. At a time when we are trying to lower the deficit and not hurt the economy, a tax on something that people are likely to continue to buy in the same quantity is probably a good thing. Felix Salmon says a host of so-called sin taxes on things we wouldn’t mind less of – but probably won’t get – like pollution, could be the best way to solve our nation’s economic woes right now, for the very fact that if they were structured well they won’t hurt the economy.

But I think this in part misses the larger point. Taxes, in general, tend not to alter behavior. That goes for sin taxes as well as income taxes or corporate taxes or financial taxes. There is little proof that companies or individuals would try to earn less or would spend less if taxes were raised. Job creators are likely to continue to create more jobs as long as it creates more wealth for themselves. Paying an extra 2% won’t change that. Yes, at the extreme, higher taxes slow the economy, but not at the rate hikes we are talking about. Salmon says fat taxes are generally hated by both Democrats and Republicans, and there is a reason. Poor people generally eat fattier foods than rich people, who can afford to shop at Whole Foods and eat organic. Raise the tax on fatty foods, and you are only making the people who are most likely to need health care less able to afford it. And as a result, fat taxes can further increase the wealth gap in the country. You could plow the money back into programs that help to relieve poverty or make healthy foods more available in poor neighborhoods, and that could lower inequality, but in a roundabout way. The nice thing about a small income tax increase is that it could directly improve the wealth gap, and the same time probably do little damage to the economy.

(MORE: Can A Soda Tax Fight Obesity?)

But if we are not going to raise income taxes then as a back up I like this professor’s suggestion of a what I am naming the touchdown tax, which is a tax on college football games. Most of the people attending college football games either go to college or have graduated from college. So you are likely to be capturing the wealthier, or potentially wealthier, portion of our nation. Maybe we should throw in a late-night pizza tax as well.

Stephen Gandel is a senior writer at TIME. Find him on Twitter at @stephengandel. You can also continue the discussion on TIME‘s Facebook page and on Twitter at @TIME.

SPECIALS: The 10 Riskiest Tax Moves