New “Taxation” for Unhealthy Eaters
With obesity rates and health care costs spiraling out of control among the wealthy countries worldwide, many governmental agencies are implementing novel and aggressive measures to offset these costs and push consumers to reconsider unhealthy (disease-promoting) food choices. In a recent paper published in Health Affairs (2012) researchers at Columbia University Medical Center and University of California, San Francisco suggest a tax on sugary beverages would do the country a world of good. The researchers’ findings suggest, based on data from 2003-2006 NHANES and dietary survey, that a penny-per-ounce tax would reduce diabetes, save 100,000 from cardiac events and stroke, and cut down on premature death. These predictions come from the fact that Americans consume roughly 13 billion gallons/year of sugary beverages. That equates to about 42 gallons per American or 5,376 ounces. At 3 grams of sugar per ounce American average 16,128 grams of sugar/year (64,512 calories/18 lbs fat). This is an obvious problem.
“While there is some uncertainty as to what drinks people would choose instead of taxed beverages, our conclusion that a penny-per-ounce tax would reduce consumption by 15% is actually a conservative estimate,” said Y. Claire Wang, MD, ScD, assistant professor of Health Policy and Management at Columbia University's Mailman School of Public Health. According to researchers while sugar-sweetened beverages are inexpensive, the savings cost a bundle. In fact, researchers suggest the intake of sugary beverages cost the U.S. about $174 billion per year on diabetes treatment costs and $147 billion on other obesity-related health problems. And the problem is more than weight gain; researchers say weight gain is just one factor in how sugary beverages contribute to diabetes and heart disease. Opponents to the tax suggest it would selectively pick on the poor and underprivileged. Unfortunately however, they represent the fattest population in America.
These tax proposals may be new in America, but Europe has been employing them more aggressively. As a prime example, Hungary recently implemented the most comprehensive law of its kind to date, imposing special taxes on foods with high fat, salt, and sugar content. The strategy is not the first of its kind (albeit more inclusive) as many other European countries have implemented and considered various policies to combat obesity. For instance, Denmark is one of several European countries to tax sodas, and it has imposed a levy on candy for nearly 90 years. The country was also the first to completely ban the use of trans fats, with Austria and Switzerland following closely behind. Denmark also plans to charge a sin tax on foods with high saturated fat content. Finnish Prime Minister Jyrki Katainen hinted that these policies have initiated a domino effect among many other European countries, as seen with the new law implemented in Hungary.
The most recent policy implemented in September, 2011 will force Hungarians to pay a 10 forint ($0.04) tax on foods with high fat, sugar and salt content, as well as increased tariffs on soda and alcohol. The Hungarian government strongly argues that when one considers the fact that a diet high in the aforementioned ingredients leads to obesity and most major diseases, logical reasoning makes it clear that those who partake in such indulgences should also pay a premium to help offset the financial burden placed on society to deal with increased health issues. Hence the expression ‘fat tax’. The expected annual proceeds of €70 million ($89 million) will go toward state health care costs and addressing the country’s 18.8% obesity rate – 3 percentage points higher than the European Union (EU) average of 15.5% (according to a 2010 report by the organization for Economic Cooperation and Development). To provide a relative perspective, Germany has a 13.6% obesity rate, and Romania, at the bottom of the list, has a 7.9% obesity rate. Hungarian Prime Minister Viktor Orban has directly stated, “Those who live unhealthily have to contribute more.” Essentially, those whose diets land them in the hospital should help foot the bill. This is particularly relevant in Hungary which has a health care deficit of €370 million ($472 million).
Carolyn Banfalvi, co-founder of Taste Hungary, explains that the eating culture in Hungary greatly contributes to its high prevalence of obesity. Apparently, Hungarians frequently consume desserts and foods in general that are categorized as “very fatty” – with traditional cooking ingredients including pork and goose fat. “What they call bacon here is often pieces of pure lard,” she explains. A five-layer vanilla and chocolate buttercream dessert with a caramel-glazed top layer known as the dobostorta cake is considered Hungary’s best-known indulgence, and can be found in almost any coffee house or bakery lining the streets of Budapest.
There are major concerns, similar to those presented in Romania, that the tax will place an unnecessary burden on the lowest economic classes. Hungarians already spend 17% of their income on food, and they pay an extra 25% tax on most of the food and drink products they consume; already being one of the highest tax rates in the EU. The major criticism of the new tax policy surrounds the fact that the poorest in the country consume the greatest quantities of the processed foods to be taxed. “The economic situation here is really pretty bad. A lot of people don’t have any extra money to spend on anything,” said Banfalvi. “Life here is not cheap if you’re an average Hungarian making an average salary.”According to Lisa McCooey, director of communications for Food Drink Europe, taxable products will include (but are not exclusively limited to):
- Soft drinks and energy drinks with added sugar and caffeine
- Pre-packaged sweetened products
- Salty snacks and high-salt condiments
- Soup mixes, gravy mixes, and bases
Archie Turnbull of the Brussels-based European Public Health Alliance, a network of public NGOs, suggested to the Hungarian government that it “consider using other pricing mechanisms or subsidies to make healthy options more affordable”, such as making fresh fruits and vegetables more accessible. Further questions have been raised related to the overall effectiveness of fat-tax legislation. It is debated if increasing taxes can actually translate to a decrease in obesity and health care costs as, according to McCooey, “Scientific research shows that taxation is not an effective instrument in addressing consumer behavior and will have no impact on obesity rates…Consumer information and education, not tax, is the way to advance consumer understanding of healthy eating.” Even though the link between the price of a product and its purchase is clear, taxes alone will not lead to healthier habits he explains. Furthermore, based on Banfalvi’s insight on cultural eating habits within Hungary, it is clear that an increase in prices for unhealthy foods would be no small change. This is considering the facts that many Hungarians use goose fat on a daily basis for cooking – and a plate of pickled vegetables is universally considered a salad. Considering the unique social/cultural environment in Hungary, it leads one to wonder if the policy will actually aid the less educated, poor citizens in making better dietary decisions and improve the healthcare state of those who need it most.