Tax on unhealthy foods may not decrease obesity rates
Denmark has instituted a tax on foods containing more than a certain amount of saturated fat. Approved by nearly 90 percent of the Danish parliament, the tax mainly targets dairy and meat products. It raises retail prices of goods (such as butter, cream, certain cheeses, pork fat, and especially lard) by up to 35 percent.
Danes justified the measure by citing their nation’s rising obesity rate, the desire to increase and improve Danish life spans and the health care industry’s burden of treating symptoms of obesity. The Danish lifespan of 79 years is falling below that of their Western European counterparts, and their obesity rate is almost 10 percent. In comparison, the obesity rate in the US is almost 34 percent.
If the Danish tax sounds like an invasion of privacy, consider that about forty states in the US have also adopted taxes on some unhealthy drinks and snacks; an example is sugary soda — diet soda is exempted. In contrast, many countries simply subsidize certain healthier food products, like vegetables, in their fight against obesity.
One problem with the Danish plan is that the demand for these unhealthy products might be inelastic; even with price increases, people will adjust and keep consuming the same amount. If a Danish package of butter used to cost around $6, and it now costs $6.50, Danes might just pay more for the sake of their toast. Some Danes might not even realize how much more they are paying because of the tax.
This is because the relatively low price for each food item could fool people; since they do not realize how proportionately large the increase is, they might not adjust.
Danish restaurants that serve unhealthy foods are also targeted by this law. They have two choices after the increase: either raise prices of entrées, or use less of the taxed goods in the entrées. The hope of Danish lawmakers is that these restaurants will keep their prices stable and instead curb their use of butter and other fatty ingredients. But there is no way to know which option the restaurants will choose.
The owner of “Relae,” a restaurant in Copenhagen, plans to raise his prices slightly, not start serving healthier items. He would rather produce what people will keep buying than risk changing his product.
If I go to Wendy’s and discover that the price of a value burger has increased from $1 to $1.25, I will still choose to buy a few of these burgers rather than the small, probably stale, $6 salad. However, if the salad’s price is decreased, consumers may be more likely to change their choices. The same problem exists in the grocery store; even if the price of butter increases, it is still cheaper than “I Can’t Believe It’s Not Butter.”
Adjusting prices to affect consumer behavior is common, and doing so to protect people’s health is a praiseworthy idea. Not to mention the additional revenue will bring to the Danish government.
However, the Danish government might see better results in their campaign against obesity if they simply try to better educate their citizens on the negative consequences of obesity. Due to the global recession, this tax is just another financial burden Danish citizens will have to deal with.
Rachel Farhi is a senior political science and English literature double major and may be reached at [email protected] com.