Moral of the story: The financial crisis may in fact be an overall positive factor in health care reform. Between the stimulus bill and the need for new funds at a state level there may be some movement here. This article talks about taxing food that are unhealthy while subsidizing healthy foods. This blog wholeheartedly supports such a measure, as long as it is applied towards food groups such as soda and candy and not unhealthy subsitance foods that would unfairly target poor populations that rely on such foods. A soda tax would go a long way towards keeping milk money for milk and budgets in the black.

“Fat taxes” and the financial crisis

The Lancet, Volume 373, Issue 9666, Pages 797 - 798, 7 March 2009

Original Text

Karen McColl

Introducing taxes on junk foods and subsidies for healthy foods has been hotly debated in several countries. Could such moves build healthier populations and economies? Karen McColl reports.

The Governor of New York has proposed a new “soda tax” as part of measures to balance the state's budget following the shortfall caused by the financial crisis. The potential for so-called “fat taxes” on unhealthy foods—or subsidies on healthier foods—to improve public health has been the subject of much debate. Could these economic measures help respond to the financial crisis? There has been much talk about “green solutions” to the economic downturn. Could there be a role for public health solutions too?

In December, 2008, New York's Governor, David Paterson, proposed a new 18% tax on non-diet soft drinks as part of plans to tackle the state's largest ever budget deficit. State policy makers predict that the new tax—which, if approved, would come into force on June 1—would lead to a 5% drop in soft drink consumption and would also raise US$404 million for health-care spending in the first year.

The soft drinks tax is part of a package of proposals to tackle obesity in the state's children. But officials confirm that the projected $14 billion budget shortfall this year—caused by the meltdown in New York's financial services sector—presented a new opening for this type of tax.

The argument that using taxes or subsidies to influence food prices could be a valuable tool in preventing obesity and other diet-related disease in industrialised countries is not new. There has been debate in several countries—including Denmark, France, New Zealand, and the UK—about the possibilities for using taxes or subsidies in this way.

In economic terms, so-called “fat taxes” or “junk food taxes”—like taxes on tobacco or alcohol—make sense. The costs to society resulting from obesity and other diet-related diseases are immense—in terms of health-care costs, sickness absence, welfare payments, and lost tax revenue—and these are not reflected in food pricing. In New York state alone, for example, treatment for obesity-related health problems costs $6·1 billion each year.

Research suggests that, hypothetically, taxes do have considerable potential to influence food choices, change diets, and improve health. In the UK, for example, Oliver Mytton and colleagues modelled three different tax scenarios and concluded that a carefully designed tax could avert up to 3200 deaths from cardiovascular disease each year. A report published in 2007 by the Danish Academy of Technical Sciences concluded that a tax exemption for “healthy” products (including fruit, vegetables, rice, pasta, potatoes, and fish products) combined with a 30% tax increase on “unhealthy” products would bring the Danish population's diet in line with national dietary guidelines. The Academy's report ignited widespread debate and the Danish Government established a new Commission on Disease Prevention, which is due to report on this issue later this month.

But research also highlights that poorly designed measures could have unintended—and even counter-productive—effects. This is because changes in the price of one food product can affect the consumption of other products that are either eaten with or instead of that food. Many foods are related to other food products in this way and it can be difficult to predict these effects. In one of the scenarios tested by Mytton and colleagues, beneficial reductions in saturated fat intakes were partly offset by an increase in salt consumption and decreases in polyunsaturated and monounsaturated fat intakes. They concluded that the taxes proposed under that particular scenario would do more harm than good and called for new taxes to be carefully targeted.

The most controversial aspect of the “fat tax” debate is that any new tax on unhealthy foods is likely to hit poorest groups hardest. A “fat tax” would be regressive—in other words, low-income households would spend a higher proportion of their income on the tax than higher income households. The potential effect of New York's proposed “soda tax” on the state's poorest citizens, for example, has been heavily criticised. “The Governor of New York announced a few weeks ago that he was not going to impose any taxes on the rich. Yet the same governor seems to have no qualms imposing regressive taxes on the African American poor”, said Adam Drewnowski, director of the University of Washington's Center for Obesity Research. “If you look at the map of soft drinks consumption in NYC and the map of poverty you will see that they are—in fact—one and the same.”