I explore and justify the idea of a calorie tax, while showing that even those rejecting paternalism have reason to support the proposal.
Responding to rumors from the Wall Street Journal that congress is considering excise taxes on sugary sodas, Kevin Drum writes
this whole thing is ridiculous. The issue here is highly caloric sweeteners, not soda per se. In other words, high fructose corn syrup, which is what virtually everyone use
s to sweeten their drinks these days. So why on earth would we tax Pepsi at a penny an ounce at the same time that we massively subsidize HFCS? And even if we got rid of the subsidies, which would be a fine idea in any case, why tax soda? If this is the direction we want to go, why not just tax sugar and HFCS directly, regardless of what it goes into?
This doesn't go far enough, why not tax calories directly? Such a policy would be simple to implement by levying the tax on basic ingredients. Concerns about regressive taxation could be addressed by rebating a significant portion of the money raised.
At the margin, a calorie tax would give restaurants and food processors an incentive to cut calories at the margin. Burger King executives would see the potential profit from making customers explicitly ask for mayo to be on their whoppers. Restaurants would offer more calorie-free beverages.
This isn't about being paternalistic! It is commonly observed that people tend to pick up the eating habits of those around them. This is distinct from the idea of assortive mixing, "obese people hang out with obese people". I am referring to the much stronger casual claim that the mere presence of fat people tends to make people around them fat, suggesting a classic network externality. This has a surprisingly strong amount of econometric evidence behind it, though there is some controversy.
Moreover, eating habits seem to be highly path dependent. After all, there's a reason why there is so little regional variation in the diet of Americans across 50 states with different local resources and economic status, despite the large discrepancy in eating habits from other developed countries. Indeed, the idea that familiarity is important in food purchasing decisions is the guiding principle behind billions of dollars of ad spending.
These two factors suggest the presence of multiple equilibrium diets. In some of them, over quarter of the population ends up with type II diabetes, while other equlibria result in much higher levels of health and fitness. Clearly, the potential benefits for collective action are large.
Meanwhile, the imposition of even a very small calorie tax could significantly change the "default" eating habits of the American people without imposing financial hardship on our poor or greatly affecting the general enjoyment we receive from our food. In the process, we raise revenue for public spending, save billions of dollars in health care costs, and improve the health of the population.
Seems like a win/win...
[Cross-posted at StochasticDemocracy.com]