Seeing the Easter candy displays pop up in my local grocery two weeks ago—immediately replacing Valentine’s Day candy, which immediately replaced Christmas candy, and so on—has got me thinking about the seemingly arbitrary lines we sometimes draw in our food policies.
Consider the Washington state sales tax exemption for candy and gum, currently on the chopping block in the legislature. Current state tax policy means that when you reach for a candy bar in a grocery store you won’t pay sales tax, but go for a pre-assembled salad in the same store’s deli, and be prepared to tack on 8.6 percent (not to mention that candy bar is the energy equivalent of a car crash). Or consider a proposed excise tax on packaged beverages, such as bottled water and soda (for more, see Washington Budget and Policy Center’s excellent post).
How we price food can have a substantial impact on the dietary choices we make. In a previous post, I wrote about the surprising and unintended side effects of posting nutritional information, one of the ways that many states and localities are trying to deal with the obesity epidemic. The assumption that providing consumers with better information leads them to smarter choices may be mistaken.
So if basic nutritional information isn’t enough on its own, maybe pricing is the way to go. One study reports that junk food taxes may be more effective than healthy food subsidies. The study rated different foods by “calorie for nutrient,” where healthy foods scored lower (providing more nutrients per calorie), and unhealthy foods higher (more empty calories and fewer nutrients). A group of volunteer mothers were given a sum of money and asked to do their shopping. Groups were first shown foods priced the same as nearby groceries; then, they were either shown the same foods where junk food prices had been inflated (by 12.5 or 25 percent) or healthy food prices had been reduced accordingly. The results?
“The junk food taxes caused a real shift in nutritional quality because the money saved on junk food was spent on healthy food, which has more nutrients per calories. However, when the researchers subsidized healthy food in their test, many participants spent the savings on—wait for it—junk food. A subsidy for health foods actually increased the amount of fat, protein, and carbohydrates from that simulated shopping trip by about 10 percent each.”
In other words, a tax-only approach works while a subsidy-only approach doesn’t. For more proof of taxes working take a look at a study released last week from nutrition researchers at the University of North Carolina. It shows that an 18 percent tax on soda causes people to consume 56 fewer calories per day and lose about five pounds per year, on average.
Putting a higher price on unhealthy foods leads to smarter shopping choices and helps reduce a market externality—the hidden health costs of skyrocketing obesity rates. But just as importantly, health-food subsidies by themselves may actually be counterproductive because they may encourage more spending on junk food.
But a junk food tax shouldn’t be the whole solution for the Northwest. In Washington, for example, the last thing the state needs to do is make its tax system even more regressive than it already is. Plus, low-income families are more likely to live in food deserts: areas lacking real grocery stores. A junk food tax won’t give people in food deserts access to healthy foods—it would just raise the price of all the food to which they have access (since the only food that food deserts have are often mini-markets stocked almost entirely with high-calorie, low-nutrient packaged foods).
The solution probably requires a piecemeal approach. Some possibilities include finding incentives to bring healthy food options into poorer neighborhoods; creating disincentives for the unhealthy foods that lead to higher rates of obesity and diabetes, and their associated health care costs; giving clear price signals to smarter eating choices by lowering the costs of healthy foods (I’d like to see the effect of combining healthy-food subsidies with higher junk-food prices to discourage the purchase of junk food while encouraging healthier choices); and providing better basic food education—like cooking skills or food budgeting—or even food ambassadors to encourage a long-term shift towards a healthier food culture.
Peeps photo courtesy of Flickr user urtica under a Creative Commons license.
Pepper photo courtesy of Flickr user timtom.ch under a Creative Commons license.
Mhunter
Rather than simply focusing subsidies on healthy foods and taxing the unhealthy foods, it would seem to make more sense to subsidize healthy lifestyles. Numerous studies have shown that incentives do get people to do things they might not otherwise do so subsidies are effective, but as this study shows, money can be directed in directions that are unintentional. If we instead subsidized people for keeping their bodies healthy within the limits of their abilities, the selection of healthy food would be part of achieving the goal as opposed to being a goal in of itself. Its hard to keep cholesterol levels and blood pressure down on a poor diet.
addominali
MHunter is right! I have nothing against taxing unhealthy foods, but subsidizing healthy lifestyles is of extreme importance if we really want americans to change.
SteveG
An elegant way to promote both goals—healthier foods and healthier lifestyles—would be to establish a junkfood-tax-funded “Active Transportation Trust Fund” that would create dedicated funding for sidewalks, bike lanes, bike paths, etc. The ATTF could, like the Energy Trust of Oregon, solicit project proposals, and award grants according to their projected cost-effectiveness, in terms of calorie burned per dollar spent. I imagine we’d begin to see a lot more safe routes to schools and major workplaces.