Should there be a special tax on junk foods?

Yes

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by Peg Lewis

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Why Junk Foods Should Be Taxed

Congress has several reasons for applying taxes to consumed goods at the national level, and state legislatures, using similar arguments, impose taxes on their citizens as well. In the case of junk food, taxation is appropriate at both levels.

First, these three reasons for imposing taxes account for most of the taxes you pay:

1. The tax provides income for the government (federal or state).
2. The tax pays for a service or a use related to the taxed item.
3. The tax is designed as a deterrent by increasing the price of of an item.

Here are some examples of taxes in each of these categories. Many taxes serve more than one purpose!

Taxes on cigarettes provide a reliable source of income for governments: because of the addictive nature of smoking tobacco, the smoker will tolerate paying more because doing without is not an option. A secondary reason for taxing cigarettes is to pay for the societal costs for the subset of the society who choose' to smoke. (At issue is the matter of who caused the addiction and whether smoking is truly a choice.) Taxes on alcoholic beverages are quite similar.

Taxes on gasoline are somewhat different: both states and the federal government have imposed their separate taxes on gasoline consumption explicitly to pay for highway construction and repair. Another reason has arisen more recently: to offset the damages due to pollution and other environmental effects. For example, California has exceptionally high gas prices because of their high level of environmental awareness (and its politicization there) and the resulting perceived need to address environmental costs due to driving and therefore the consumption of gas.

Taxes as deterrents are not common, despite what consumers typically think. Rather, they are primarily money-makers for governments. Whether anyone drives or smokes or drinks less because of the taxes on gas, cigarettes, and alcohol is debatable. Nonetheless, when consumers hear that junk food could be taxed, they assume it is done as a deterrent.

To summarize the reasons for imposing taxes, they are a source of income for governments, they help offset societal costs of the use of the product they are imposed on, they can pay for construction of related infrastructure, and they can serve as disincentives.

Taxes on junk foods have similar rationales. In the debate on whether to tax junk food, several questions should be addressed:

1. In the category of taxation I will call 'a good way to raise money', is it fair to single out a particular type of food? Will it work? Who wins and who loses?

2. In the category of taxation for the purpose of offsetting costs generated by this type of consumption, are there societal costs of the choice of a subset of society to eat junk food?

3. Are there particular benefits of eating junk food that can be financed through taxation (as roads are with the gas tax)?

4. Would taxation serve as a deterrent for eating junk food (even though taxation doesn't work well as a deterrent elsewhere)?

Let's take a look at each of these reasons for taxation and apply them to junk food to see whether taxing junk food is a good idea.

First, is it a good and fair way to generate money for the government? Taxing junk food would of course provide more income for governments, but whether it would be 'fair' to tax one kind of food over another is a question that has not been debated: all cigarettes, all alcoholic beverages, all gasoline, but not all food. This is a type of tax we haven't seen before, except where states tax some types of food such as sodas (but don't tax other junk foods). Legislators are hesitant to impose taxes without the appearance of serving their constituencies, and raising or adding taxes is never popular. The benefits would have to be obvious even in light of the broad consumption of junk food or the politician would not take the risk of taxing it just for the sake of raising revenues.

Second, would taxing junk food offset costs generated from their consumption? Critically, this type of taxation could offset costs, the costs being in health care expenses that are ultimately borne by the whole society, for example diabetes, heart disease, and possibly cancers of all sort. In order to make a case for such a tax, the benefits would have to be laid out clearly and assurances would need to be made that the tax revenues would indeed be directed toward these public costs.

Third, I can't think of any advantages of eating junk food, which by definition is stuff you put in your mouth that has compromised nutritional value, if any. (Diet Coke, anyone?) So a tax to increase its use wouldn't make sense.

Fourth, would taxing junk foods keep people from buying them? The taxation of junk foods might well serve as a deterrent (which in turn would reduce the health-cost burden of consuming them). If I have a choice, as I enter the store, of having a fruit-juice beverage for $1 or a soda for $1.25, the 25 cents being tax, I would probably think twice before deciding on the soda. At least the extra charge would serve as a reminder that this product has an extra cost associated with it the burden of paying the costs to society of my not being as healthy as I could be, which are many.

Of course, the choice is still before me, and I can decide for myself whether I will pay this tax, a choice that is not so easy to make when it comes to gasoline, cigarettes, alcohol, or consumer goods. Just as with these, it is possible that over time the tax on junk food would cease to become a disincentive, as the novelty of the extra cost of the product wears off but the choice is still mine because other non-taxed true-food items exist (whereas with gas, cigarettes, alcohol, and consumer goods leave me with no tax-free options).

In fact, the junk-food tax relegates junk food into the category of consumer item rather than food. That makes sense: calling it food just because it goes in our mouths is at the root of the issue. It isn't food and it shouldn't be taxed like food.

So the tax on junk food is a good idea. At very least, it will help pay some of the costs of our eating these substances, if not remind us that there is indeed a cost, the loss of our good health, for doing so.

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