World - The folly of a trans-fat tax

Fat people and over-eaters are taking money that rightfully belongs to their svelte fellow citizens, or so it is argued. A figure commonly bandied about in the UK is that this excess fat costs the economy £7bn in obesity-related medical costs and lost productivity. Sentiment is spreading in bureaucratic circles that governments not only can but also should do something about it. In recent days California passed a ban, to come into effect in 2010, on so-called “trans fats” (partially hydrogenated vegetable oils), which have been shown to increase the risk of heart attacks dramatically. While such cities as Baltimore, Boston, Philadelphia and Seattle already ban trans fats (as does Denmark on a national level), California is the first US state to do so.
Meanwhile, a report from the French budget ministry laid out several ways to tax le snacking, and in the UK, which already has special taxes for fatty and salty foods, the Department of Health announced a new programme to notify and counsel the parents of children who are “very overweight”. We have come a long way from September 1993, when Hillary Clinton responded to a House committee member who had asked her, incredulously, if she proposed taxing caffeine, cholesterol and salt. “If there is a way that you can ever come up with to tax substances like the ones you just named, we’ll be glad to look at it,” she said.
Complaints that regulating fat ought to be none of government’s business now fall on deaf ears. But this is not because officials have given much rigorous thought to the matter. The stated goals of food regulators tend to shift – sometimes they involve consumer protection, sometimes economic policy (whether to recover lost productivity or improve the government’s finances through food taxes), sometimes another consideration (such as animal rights, in the case of Chicago’s notorious ban on foie gras). The goals of such regulation are vague because the philosophical grounds for it are unclear. Is regulating fatty food akin to regulating dioxins, pesticides and other hazardous chemicals? Or is it akin to the US experiment in prohibiting alcohol in the 1920s?
At first glance, banning trans fats is more like banning whisky than banning DDT. People choose to eat, say, fried dough or ice cream (the Dutch even eat them together, in the form of poffertjes!), so they should be responsible for the consequences. But there are mitigating circumstances that make the regulation of trans fats less objectionable. First, trans fats are not detectable in any rough-and-ready way outside the laboratory. No one has to ask whether bourbon has alcohol in it. But a doughnut free of trans fats tastes similar to one loaded with them.
This indistinguishability, in fact, is central to the argument for regulating trans fats. Their benefits in convenience and taste are negligible. Their benefits in profitability are shrinking as alternative products come on the market. But the price they exact on consumer health is vast. Eliminating trans fats could reduce heart attack deaths in the US by up to 19 per cent, according to the New England Journal of Medicine. The more you know about trans fats, the less important seems the choice of which consumers are being deprived.
In any health-conscious country, consumer knowledge about trans fats will create a stampede away from them. So why is regulation necessary? Partly because this stampede could favour big companies over small ones. Consider Dunkin’ Donuts, the Massachusetts-based chain, which for almost half a century has been making doughnuts so delicious that you close your eyes when you eat them. With its 7,000 outlets, Dunkin’ can run, and has run, trials to assure that replacing trans fats with safer oils will not affect taste. It can publicise – and, for almost a year now, has publicised – its freedom from trans fats.
A one or two-shop doughnut maker cannot afford to do that. Consumers might decide that, when in doubt, the wiser course is to avoid independent doughnut-makers altogether. So the public’s growing unease about the hazards of trans fats creates a disadvantage for companies without big PR budgets. Outright bans are not the only way to keep the market competitive. San Francisco, for example, has a programme allowing restaurants to pay a $250 fee which entitles them to place a “trans-fat-free” sign in their window. Once trans fats are identified as a hazard, there is a role for the state in vouching for companies that do not use them.
A ban on trans fats poses fewer practical problems than a complex policy of taxing junk foods. Food taxes are a time-honoured way of raising revenue, but they are an unreliable way of modifying behaviour. The elasticity of junk food prices is not very well understood. Defining junk food is also hard. In the UK a 17.5 per cent tax imposed on ice cream, salted nuts and “potato crisps, potato sticks, potato puffs and similar products” led to a big case in July when the High Court overruled a value added tax tribunal. It held that Pringles crisps should not be liable to this tax since they were only 42 per cent potato.
In France, an interministerial communiqué published in Les Echos this week laid out further logistical difficulties with “nutritional taxes”. Eric Woerth, France’s budget minister, made clear that raising VAT on le snacking – pizzas and sandwiches and the like – was “out of the question” for this autumn’s legislative session.
His circumspection is understandable. The appeal of fat taxes is the same as that of cigarette taxes and lotteries aimed at boosting educational spending – they open the way to a regressive fiscal policy that is otherwise unavowable. The pitfalls of regulating junk food are thus more political than economic. One man’s poison is another man’s meat – usually a poor man’s.
The writer is a senior editor at The Weekly Standard