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Fat Taxes: Big Money for Small Change

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Author Info
Hayley Chouinard (Washington State University)
David Davis (South Dakota State University)
Jeffrey LaFrance (University of California, Berkeley)
Jeffrey Perloff (University of California, Berkeley)

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Abstract

In an attempt to improve the nation's health, many U.S. policy makers have or are considering imposing taxes on the fat in food. Dairy products constitute a large portion of at home fat consumption of particularly harmful types of fat, and nearly all U.S. households consume these products. We estimate a demand system for dairy products, which we use to simulate substitution effects among dairy products and the welfare impacts of fat taxes on various consumer groups. We find that even a 10 percent ad valorem tax on the percentage of fat would reduce fat consumption by less than a percentage point. Given that the demand for most dairy products is inelastic, a fat tax is an effective means to raise revenue. However, these fat taxes are unattractive because they are extremely regressive, and the elderly and poor suffer much greater welfare losses from the taxes than do younger and richer consumers.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Forum for Health Economics & Policy.

Volume (Year): 10 (2007)
Issue (Month): 2 ()
Pages: 1071-1071
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Handle: RePEc:bep:fhecpo:v:10:y:2007:i:2:p:1071-1071

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Related research
Keywords: equivalent variation fat tax regressive

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. LaFrance, Jeffrey T., 2004. "Integrability of the linear approximate almost ideal demand system," Economics Letters, Elsevier, vol. 84(3), pages 297-303, September. [Downloadable!] (restricted)
  2. Timothy K.M. Beatty & Jeffrey T. LaFrance, 2005. "United States Demand for Food and Nutrition in the Twentieth Century," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 87(5), pages 1159-1166, November. [Downloadable!] (restricted)
  3. Deaton, Angus, 1988. "Quality, Quantity, and Spatial Variation of Price," American Economic Review, American Economic Association, vol. 78(3), pages 418-30, June. [Downloadable!] (restricted)
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  4. David Cutler & Edward Glaeser & Jesse Shapiro, 2003. "Why Have Americans Become More Obese?," NBER Working Papers 9446, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Fred Kuchler & Abebayehu Tegene & J. Michael Harris, 2005. "Taxing Snack Foods: Manipulating Diet Quality or Financing Information Programs?," Review of Agricultural Economics, American Agricultural Economics Association, vol. 27(1), pages 4-20, 03. [Downloadable!] (restricted)
  6. Barzel, Yoram, 1976. "An Alternative Approach to the Analysis of Taxation," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1177-97, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nordström, Jonas & Thunström, Linda, 2007. "The Impact of Tax Reforms Designed to Encourage a Healthier Grain Consumption," UmeÃ¥ Economic Studies 717, Umeå University, Department of Economics. [Downloadable!]
  2. Etilé, F, 2008. "Food Price Policies and the Distribution of Body Mass Index: Theory and Empirical Evidence from France," Health, Econometrics and Data Group (HEDG) Working Papers 08/10, HEDG, c/o Department of Economics, University of York. [Downloadable!]
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