Tax away bad habits: A HealthCentral Explainer

SSuchy Editor
  • How do you get someone to stop doing something they really like to do even though it’s not good for them?  That’s an issue at the center of several of the world’s biggest health challenges. One approach—one that tends to raise a lot of eyebrows—is to levy a tax on the activity or item.


    These kinds of taxes are less than affectionately known as ‘sin taxes.’  Simply put, sin taxes are meant to deter a person from consuming something that is bad for them by making the product more expensive. 


    Smoking: the Public Health Success Story


    When smoking became Public Health Enemy #1, the government levied a tax on cigarettes—and a hefty one at that.  Currently, cigarettes are taxed at both the state and the federal level.  In 2009, President Barack Obama signed into law the Children’s Health Insurance Program Reauthorization Act of 2009, which raised the federal tax rate on cigarettes from $0.39 per pack to $1.01 per pack.  The thinking was that by implementing this ‘sin tax,’ people would be encouraged to kick the habit because of the high cost of the cigarettes.

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    And it worked.  Smoking rates did go down.  In fact, the American Lung Association found that every 10 percent increase in the price of cigarettes causes the youth smoking rate to drop by about seven percent. 


    Tax away obesity


    Conventional wisdom would say that the same principle could apply to our other bad habits, say, the unhealthy diets that are helping to drive the ever-growing obesity rate in the U.S.  A few years ago, Thomas Frieden, director of the U.S. Centers for Disease Control and Prevention, zeroed in on soda, saying that a tax on soft drinks could deter Americans from ingesting hundreds of extra calories a day through the nutritionally-empty, but calorically-dense beverage. 


    So far, 33 states have imposed sin taxes on full calorie soft drinks – the highest tax is in California, at 7.25 percent.   Both Washington D.C. and the state of Colorado removed sugared beverages from the list of grocery items exempt from sales tax.  And the city of New York has as far as to ban  the sale of Big Gulp sodas in restaurants, food carts and theaters. 


    But does it work?


    Well, that has yet to be determined.  Public health officials are optimistic.  In fact, the U.S. Department of Agriculture reported in 2010 that a 20 percent price increase on sodas could reduce obesity by about 3 percent for adults. 


    But as we saw in the most recent CDC obesity data, no state has been able to reduce their obesity rate in the last several years, despite taxes on unhealthy food items.  In fact,  obesity rates across the country are expected to climb to 60 percent by 2030, if rates continue to rise at their current rate. 


    And news came out of Denmark this week that its  government plans to actually eliminate its current tax on high fat foods.  This is big news because Denmark was the first country in which a fat tax – a tax on all foods with more that 2.3 percent saturated fat – was levied. 


    Instead of lowering the country’s relatively modest 13 percent obesity rate, the tax encouraged Danes to head across the border to Germany to buy fatty foods while avoiding the tax. This caused an economic burden on the country and, in some cases, put Danish jobs at risk. 


    An unequal burden


    The challenges in Denmark could be seen to reinforce a commonly held objection to the concept of taxing unhealthy foods--it places an economic burden on the economy as a whole, and low-income people in particular. 


    This argument was especially prevalent when New York City’s mayor Michael Bloomberg banned Big Gulp sodas.    Some argued that people with limited resources depend on access to cheap foods that are high in calories to feed themselves and their families.  So, taxes and bans on these kinds of food would put an unequal burden on people who cannot afford healthier, but presumably more expensive foods. 

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    Do you really need it?


    The obvious retort to this argument is that none of these foods are necessary to a diet and provide no nutritional benefits.  But this touches on a key difference between the premise of using taxes to curtail smoking rates and using them to change eating behavior.


    The fact is no one needs to smoke; it is purely a luxury item.  Taxes on smoking triggered the predictable objections to the government acting as a “nanny state,” but most people would concede that no one needs a daily cigarette to survive. 


    The same argument cannot be made for food.  While there are certainly differences between healthy and unhealthy food, everyone must eat. If a person is hungry, they aren’t likely to try to limit their diet to healthy food.


    Another important point is that the American public does not seem to support food sin taxes, at least based on the results of the most recent elections.  Voters in two California towns overwhelmingly rejected a tax on sodas. 


    Only time will tell us how effectively the current soda taxes work to improve our nutrition habits.  Until then, keep an eye on the obesity rates.




    Medical News Today, President Obama signs Children’s Health Insurance And Federal Tobacco Tax increase into law.  February 5, 2009.  Retrieved from:


    The New England Journal of Medicine, The public health and economic benefits of taxing sugar-sweetened beverages. October 2009.  Retrieved from:


    State Sales Tax Rates for Soft Drinks and Chips/Pretzels 2011.  January 2011. Retrieved from:


    U.S. Department of Agriculture.  Taxing Caloric Sweetened Beverages: Potential effects on beverage consumption, calorie intake, and obesity. (July 2012) Retrieved from:


    BBC News, Denmark to abolish tax on high-fat foods. November 10, 2012.  Retrieved from:


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    Los Angeles Times, Soda tax rejected in two California cities. November 7, 2012. Retrieved from:


Published On: November 16, 2012