As obesity and diabetes continue to become a bigger and bigger part of American society, policymakers are attempting to limit access to unhealthy foods in attempt to curb these trends. As economic principles would suggest, sugary and fatty foods’ direct correlation to diabetes and obesity poses a negative externality on the health of our society. Normally, negative externalities pose an additional tax meant to offset their societal consequences. In the case of food, however, many argue that it is their right to buy a 64 ounce “Big Gulp” or stock up on salty snacks and are willing to fight to keep those options available.
The most famous instance of these policies coming to life was the quota on soda drinks in New York City that was to go into effect last March. The city’s Board of Health determined that large containers of soda were a leading cause to the diabetes problem in America and planned a ban for the sale of non-diet drinks larger than sixteen ounces. Immediately, citizens furiously challenged the law claiming it directly violated their right to choose. Last summer, an appeals court overturned the policy and ended this would-be ban on large drink sizes.
This weekend, the Native American Navajo tribe voted to impose higher taxes on junk foods while creating tax breaks for healthier choices such as fruits, vegetables and nuts. Under the plan, taxes on soda and unhealthy snack foods would increase to 7% while the aforementioned health foods would not be taxed at all. The objective of these rulings is to modify opportunity costs of these foods so consumers choose the healthier option simply by their preferences. If the prices are adjusted enough, the lawmakers hope that fruits and veggies will give as much of a benefit in terms of taste per dollar as the sugary options. They certainly already are providing a much better nutritional value per dollar, but that hasn’t seemed to influence U.S. consumers’ purchasing behavior in the past as much as taste.
Of these two scenarios (imposing tax hikes or quotas), the tax increase scenario seems much more reasonable. There is something scary about a full ban on a product, even if it remains available in smaller sizes. Fundamentally, the reason consumers often choose to purchase large sizes in the first place is the economies of scale: a thought process that says “what’s 25 more cents when I’m already paying $1.50?” By taxing larger sizes at a value that makes a significant price increase (let’s say an additional $1, or 40%), I believe a significant number of consumers would stick to buying the small size. In addition, eliminating free refills could be an option that does not restrict choices but makes larger quantities more costly. Going forward, using externalities to levy taxes on junk-foods may be the only option we have to solve the obesity problem in America.
The many campaigns over the years encouraging healthy eating in the U.S. simply haven’t worked, and much of the problem is that eating healthy costs more. Sure, places such as McDonald’s have added options such as apple slices to their menu, but when customers have the option to choose a McDouble (390 calories) or apple slices (15 calories) for the same price, they seem to always purchase the one that fills them up. An attempt to eliminate the junk-food options completely would violate our rights and really isn’t necessary for a large part of the population, who can effectively maintain a healthy diet and only are treating themselves to junk-food on occasion. A tax of sorts on soda and sugary/salty snacks, especially in excessive sizes, may be what America needs to control its diet and avoid serious health concerns in the foreseeable future.
Campoy, Ana, “Navajos vote to try junk-food tax in fight against obesity”, The Wall Street Journal. January 31, 2014.
Associated Press, “Appeals court rules against NYC soda ban,” July 30, 2013.
For more McDonald’s Nutrition Facts information, see this link.