The perils of a fat tax
If the legislation for the Orwellian-sounding Australian National Preventive Health Agency passes, then expect an avalanche of make-work exercises by the Agency all for the cause of making us healthier.
Armed with a budget of $133 million of your money over four years, the agency would get to work advising commonwealth and state health ministers about health issues surrounding alcohol and tobacco consumption and obesity.
It will look to create new policies about interventions in settings such as schools, workplaces and communities.
Backed by an exponential funding increase for ‘social marketing’ in its first two years, the health nanny agency is setting itself up to be a pestering one.
Perhaps the only respite for ordinary Australians from the agency’s push-marketing will be in their sleep.
The agency will also administer research grants from a ‘preventive health research fund’ to universities, academics, states and territories and NGOs.
The public health lobby will be keen to hitch a ride on that fiscal (gluten free) gravy train, and perhaps the climate change vegans will want their share of the budgetary lentil soup too.
The research script for the agency is already mapped out in the form of the final report of the National Preventative Health Taskforce. The problem with that is the taskforce report gave scant regard for any evidence critical of its paternalist policy inclinations.
This sets a worrying precedent for the future under a preventive health agency. With little effective internal or external restraints imposed on it, the agency will likely present findings confirming the interventionist leanings of health ministers keen to change what we eat, drink and inhale.
One area the agency will be keen to sink its teeth into (excuse the pun!) would be on the issue of an Australian fat tax, to possibly add to the distortionary hodgepodge of 125 different taxes already levied by governments.
The health taskforce report stated that a corrective fat tax might be needed to shift production incentives so that manufacturers produce healthier foods, and also re-weight consumer choices by lowering spending on fatty and sugary foods and drinks.
Perhaps unsurprisingly, the taskforce recommended a commission to review how taxation, grants, pricing, incentives and subsidies could ‘decrease production, promotion and consumption of unhealthy food and beverage products.’
Such a review is likely to be one of the preventive health agency’s first items of work.
While the health nannies suggest that a fat tax will discourage unhealthy consumption, and help fund the health costs of obesity, the research base in favour of this tax grab is not strong.
A study by researchers at the University of California Berkeley find that a ten per cent fat tax on dairy products such as whole milk, cheese, ice cream and margarine will raise more revenue for governments, but will not lead to significant reduction in consumption.
The taxes are also likely to be regressive, hitting poor families harder than the rich.
The researchers state ‘people could reduce their consumption of fattier . products without government intervention. Forcing them to do so by raising prices lowers their short-run welfare.’
A paper presented to the 2006 international agricultural economics conference found that a fat tax on meats to fund social marketing efforts may actually increase total fat consumption. This is because consumers will switch to poorer, less nutritional cuts of meat.
American researchers Michael Anderson and Daniel Matsa wrote a paper last year finding no evidence of a causal link between restaurants and obesity.
When considering the effect of a fat tax of 50 per cent on restaurant meals, they also concluded that ‘although a restaurant “fat tax” would have little effect on obesity, it could produce substantial dead-weight losses’ that reduce consumer welfare.
An active front for the nanny statists ‘let’s tax obese people’ crusade in the US at least has been the idea, supported by Barack Obama, to levy a national soft drink tax.
A study by Fletcher, Frisvold and Tefft analysed the impact of changes in US state soft drink taxation rates from 1990 to 2006 on changes in the body mass index. It found that a one percentage point increase in tax rates reduced average adult BMI by a miniscule 0.003 points.
Of course, Australia already has its own implicit ‘fat tax’ in the form of the GST. According to former Democrats leader and GST negotiating powerbroker Meg Lees, the GST ‘serves public health interests in that the price of fresh, healthy food would actually fall but the price of some junk food would rise.’
However, ABS data on turnover in the takeaway food retailing industry shows that sales have increased since 2000 implying an increase in food consumption.
Data from the household expenditure survey also indicates that average weekly household consumption of fast food rose between 199899 and 200304.
There is enough evidence to suggest that a fat tax would do a fat lot of food for reducing obesity prevalence.
If the preventive health agency becomes a reality, one can be almost certain it will waste precious time and scarce resources on potentially self-defeating nanny policies.
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