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Should The Government Impose A Fat Tax?

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Jo Woo

on 12 December 2013

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Transcript of Should The Government Impose A Fat Tax?

Should The Government Impose a Fat Tax?
What Is a Fat Tax?
A Fat Tax is a tax on Junk food such as McDonalds, whose consumption may lead to a rise in obesity and heart related diseases.
The Pros of the Fat Tax
Reduction in External Cost:

Pui Nga Book(Maggie),Zhao Wu, Takudzwa Gezi
Thank You!
In this presentation, we will look at the arguments for whether the government should impose a fat tax, before coming to a conclusion
• A Fat Tax would make the Junk food eater pay the social cost of unhealthy food, which reduces external cost to society.

• (Obesity is estimated to cost the UK economy around £6.6–7.4 billion a year.) (Blackwell Synergy).

The Pros of the Fat Tax
Hypothecation of the Tax Revenue:
• The government could raise tax revenue, through fat tax. This tax could then be reinvested in facilities to reduces obesity such as better medical care.

• The Danish government impose a fat tax, and received $216million, which reduced the costs of obesity related diseases.

Pui Nga Book (Maggie) Takudzwa Gezi
Zhao Wu

A Fat Tax is a tax on Junk food such as McDonalds, whose consumption may lead to a rise in obesity and heart related diseases.

In this PowerPoint , we will be look at the arguments for whether the government should or should not impose a fat tax, before coming to a conclusion.

A fat tax will also give incentives for people to
eat more healthier food, since it increases the costs of junk food, thereby reducing demand for junk food.

This will then allow people to switch to much cheaper and healthier substitutes such as fruit and veg.

Healthier foods as a substitution:

People on lower incomes, spent a higher percentage of their incomes on junk food, so will be hit hard by a fat tax.

Organic food is healthy but expensive, whilst junk food is cheaper but unhealthier.

Regressive Tax:

There may be difficulties in defining which junk foods deserve a fat tax or not. For example, no all burgers are fattening i.e. Veggie Burgers.

This may lead to market failure, thereby government failure where the government are not making the right efficient decisions.

The Cons of the Fat Tax
Difficult to impose tax on junk food:

The Cons of the Fat Tax
The Cons of the Fat Tax
The Pros of the Fat Tax
This could arguably be another way for the government to increase their tax revenue after all there is already to many taxes like VAT.

It is also punishing the majority of people that are not obese, just for the minority of obese people.

However, some of the tax revenue could be use to subsidies Organic food.

Fat Tax unfair?

Government can use alternatives such as education about healthy lifestyles, thereby reducing information failure

Depends on obesity levels in different countries since they differ
The Fat Tax may not have much impact on demand, depend on the Price Sensitivity (Price Elasticity of Demand)
The Cons of the Fat Tax
Jeanne Sahadi,2009, Taxing the fat in your food, [Online], Available at: http://money.cnn.com/2009/07/28/news/economy/health_care_reform_obesity/ [Accessed 07.12.13]

Joe Messerli,2007, Should Products Which Contribute to Obesity (Such as Big Macs and Krispy Kreme Donuts) be Taxed?,[online], Available at:http://www.balancedpolitics.org/fat_tax.htm [Accessed 07.12.13].

MARGINALEVOLUTION,2012, PAPERS INCREASINGLY ATTEMPT TO MODEL FINANCIAL UNCERTAINTY, [Online] Available at http://marginalevolution.com/blog/archives/tag/research/ [Accessed 07.12.13]

Marion Nestle,2012, Fighting the flab means fighting makers of fatty foods, [Online] Available at http://www.foodpolitics.com/2012/11/the-danish-fat-tax-reflections-on-its-demise/ [Accessed 07.12.13]

Tejvan Pettinger, 2012, Pros and Cons of Fat Tax, [Online] Available at http://www.economicshelp.org/blog/5056/economics/ [Accessed 07.12.13]
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