| Paddy, Not Fatty |
1 September 2003
|
Ireland Weighs Fat Tax
The Irish are playing around with a silly idea for their tax system. As a pro-health measure, Health Minister Michael Martin is "very tentatively" thinking about taxing high-fat foods. The flawed logic in this is the belief that tax policy can influence every spending decision.
It is very true that taxes on business expenses and excise taxes on diamonds have a significant impact on spending in these areas. It is equally true that a tax on death will not prevent people, whether rich or poor, from dying (the GOP whinging about "death taxes" amuses for this reason -- by reducing taxes, are they not encouraging the behavior?). The key to those areas of
life
where the tax has an effect on behavior is the level of the tax compared with the taxpayer's wealth.
For most people, the difference between 6% sales tax and 6.25% sales tax is unnoticeable. The amounts regular people spend in their day-to-day lives doesn't reach levels where the quarter of a percent changes behavior. The elasticity of demand is not so great that it changes anything. On the other hand, numerous New Yorkers gave up smoking when the price of a pack of 20 hit $7 thanks to hefty and sudden tax increases in their city -- it was immediately noticeable, and it was a large amount.
For Ireland's fat tax to work, then, the tax will have to hit hard and bite deeply. Minister Martin is fully aware of the shortcomings in such an approach: the good fats versus bad fats argument, sugar versus fats, and more exercise versus fewer calories. And he expects the extra revenue can shore up the health system in the Emerald Isle more than it can make Irishmen and Irishwomen slimmer. What he can't affect is someone who has enough wealth to pay the tax and eat deep-fried butter in front of the TV who chooses to do so.
Home