Fat taxes — what’s the goal?

By Bill Kaye-Blake 19/03/2013

Andrew Dickson (othersideofweightloss) was emailing me about fat taxes and I realised I didn’t have a well thought-out opinion on them. Let me start by asking, what are we trying to accomplish?

User pays — This is the point of the tax on fat people that Gareth Morgan Investments suggested in 2005:

Government could publish a range of tolerance for body mass index and those who fall within that over the year (certified say six monthly, bit like a VIC for a car), would qualify for a lower rate of personal tax (higher rate of benefit).

The idea is that fat people make themselves fat, and their fatness costs the public health system money, which is contrary to user-pays, so we need a fat tax to correct this.

If we accept this idea — fat is like cigarettes and alcohol, two products for which we already have a cost recovery scheme — then we need to keep going. First, we need to understand the full lifecycle healthcare costs of fat people compared to other groups, a point that Eric Crampton also makes. The comparison with smoking and alcohol is instructive: dying early is not necessarily a drain on the healthcare system.

Secondly, user-pays cuts both ways. We are told that fat people are fat because they aren’t active enough. Therefore, they aren’t using a whole bunch of services that the skinny, fit people use. So, yes, we could charge more for their use of health services, but they also get a rebate for the things they don’t use: backcountry huts, footpaths, etc.

Cost to society — This is more than just the strict healthcare costs. Jim Mann, Professor in Human Nutrition and Medicine, wrote a 2004 piece for Diabetes New Zealand on How a Fat Tax Can Help Fight Obesity.

debilitating illness and premature death linked to obesity also cause losses to society in the form of lost economic contributions from those who are forced to curtail work or retire early, or die while still in the work force, as well as lost contributions that many retirees make as community leaders and volunteers….

Note that Mann isn’t talking about helping people get the best for themselves, to ‘nudge’ them into behaviours that will bring them higher longer-term welfare. No, Mann is specifically looking at it from the perspective of society, of what the group loses when an individual cannot participate. Because the group loses, it must change the individual’s behaviour. The logical next step is fining people for shirking and jailing them for laziness — where does it stop? And is fat a leading cause of not contributing? I’d have thought that being selfish was far higher on the list, and no one seems to be proposing a fine for that.

Improving individuals’ choices — This options sounds noble — we’re just helping people do what’s best for them. The immediate problem is defining the ‘what’s best’. Economists generally use a neat trick. They assume that what the individual chooses to do is optimal for them. Now, let’s be clear, it is just an assumption, and Joan Robinson showed the circular logic therein. But, what else are you going to assume? There are only two other choices: someone other than the individual (you, perhaps?) have a better sense of what’s best, or that time-inconsistency of preferences means that the individual at some other point in time would have chosen differently for the present.

Improving choices comes down to two things: improving information and/or overcoming time-inconsistent preferences. Given all the information shoved down our throats for decades (gratuitous foie gras reference), I find it difficult to believe that lack of it is causing 1 in 4 adults to be obese. It’s pretty simple — veggies and fruits >> fried stuff. The time-inconsistent preferences angle is more plausible and interesting. But again, given all the existing ways that people can motivate themselves to be less fat, how much more can people in the present be disciplined by their future selves?

So, why fat taxes? The explanations offered don’t really stack up. We have to look someplace other than economics to understand the motivations. Take your pick of explanations — Foucault and Lacan immediately come to mind — but that’s a topic for another day.

0 Responses to “Fat taxes — what’s the goal?”

  • it will be nothing but a revenue grab, and a deterrent to the system, rather than promoting healthy weight. The current childhood obesity pandemic will lead to an overweight adult population, with very little chance of ever changing their ranking of obesity are stuck in higher taxation bracket. IF very few people, even with extreme intervention, actually achieve weight loss, this population will be fixed with taxes forever. Small weight loss can substantially reduce their risks, as well as maintaining metabolic health, where as they are likely still classified as overweight/obese. Why bother losing weight when you will still be taxed? Health is not an adequate driver now, and unlikely in the future regardless of taxation. But more importantly. Obesity is a multifactorial state, will the taxation be used to drive country wide policies that drive NZ cities away from the obesiogenic environment? etc etc etc

  • > The idea is that fat people make themselves fat, and their fatness costs the public health system money, which is contrary to user-pays, so we need a fat tax to correct this

    So how are we going to tax illicit sex, bad driving, etc?

    It is frustrating to see academics and others doing good, creative research into some problem or other, then suggesting “put a tax on X” as a solution. The suggested solution involves no thought at all about what other options there might be, or whether a tax might even work. Its about the same mentality as bringing in stoats because we had lots of rabbits.

    It’s OK not to have the answer. Just doing good understandable research to prove there is a problem and draw attention to it might be enough of a contribution to society.

  • With sideways reference to Gareth, does that mean Fat Cats ** get taxed as well??

    Which world was that?

    ** Well I know they are supposed to be but avoidance can do amazing things for slimming the tax take of them ones!!