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When Do Fat Taxes Increase Consumer Welfare?

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  • Jayson L. Lusk
  • Christiane Schroeter

Abstract

Previous analyses of fat taxes have generally worked within an empirical framework in which it is difficult to determine whether consumers benefit from the policy. This note outlines on simple means to determine whether consumers benefit from a fat tax by comparing the ratio of expenditures on the taxed good to the weight effect of the tax against the individual's willingness to pay for a one‐pound weight reduction. Our empirical calculations suggest that an individual would have to be willing to pay about $1500 to reduce weight by one pound for a tax on sugary beverages to be welfare enhancing. The results suggest either that a soda tax is very unlikely to increase individual consumer welfare or that the policy must be justified on some other grounds that abandon standard rationality assumptions. Copyright © 2011 John Wiley & Sons, Ltd.

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  • Jayson L. Lusk & Christiane Schroeter, 2012. "When Do Fat Taxes Increase Consumer Welfare?," Health Economics, John Wiley & Sons, Ltd., vol. 21(11), pages 1367-1374, November.
    • Handle: RePEc:wly:hlthec:v:21:y:2012:i:11:p:1367-1374
    DOI: 10.1002/hec.1789
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    2. Irz, Xavier & Leroy, Pascal & Réquillart, Vincent & Soler, Louis-Georges, 2015. "Economic assessment of nutritional recommendations," Journal of Health Economics, Elsevier, vol. 39(C), pages 188-210.
    3. Jonathan Pincus, 2018. "Grattan Institute's Case for Sugar Tax Is Not Proven," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(1), pages 41-51, March.
    4. Härkänen, Tommi & Kotakorpi, Kaisa & Pietinen, Pirjo & Pirttilä, Jukka & Reinivuo, Heli & Suoniemi, Ilpo, 2014. "The welfare effects of health-based food tax policy," Food Policy, Elsevier, vol. 49(P1), pages 196-206.
    5. Christian M{o}ller Dahl & Nadja van 't Hoff & Giovanni Mellace & Sinne Smed, 2023. "Nudging Nutrition: Lessons from the Danish "Fat Tax"," Papers 2312.11481, arXiv.org, revised Nov 2024.
    6. Juan Carlos Caro & Pourya Valizadeh & Alejandrina Correa & Andres Silva & Shu Wen Ng, 2020. "Combined fiscal policies to promote healthier diets: Effects on purchases and consumer welfare," PLOS ONE, Public Library of Science, vol. 15(1), pages 1-23, January.
    7. Alberto Pench, 0. "Time Allocation and Snacks and Sugar Sweetened Beverages Taxation," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 0, pages 1-24.
    8. Alberto Pench, 2020. "Time Allocation and Snacks and Sugar Sweetened Beverages Taxation," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(3), pages 469-492, November.
    9. Dirk-Jan van de Ven & Mikel González-Eguino & Iñaki Arto, 2018. "The potential of behavioural change for climate change mitigation: a case study for the European Union," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 23(6), pages 853-886, August.
    10. Alyssa J. Moran & Yuxuan Gu & Sasha Clynes & Attia Goheer & Christina A. Roberto & Anne Palmer, 2020. "Associations between Governmental Policies to Improve the Nutritional Quality of Supermarket Purchases and Individual, Retailer, and Community Health Outcomes: An Integrative Review," IJERPH, MDPI, vol. 17(20), pages 1-23, October.
    11. Donald L. Alexander & Jon R. Neill, 2017. "Estimating the Corrective Tax for Goods whose Consumption Affects the Consumer’s Health," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 45(1), pages 103-117, March.
    12. David Bishai, 2015. "Generalized Nutrient Taxes Can Increase Consumer Welfare," Health Economics, John Wiley & Sons, Ltd., vol. 24(11), pages 1517-1522, November.

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