Will a Junk Food Tax Work in Canada?

The fight against fat is shaping up, quickly replacing the war against tobacco, which has largely been won.

There is no dispute that obesity is a serious health problem with adverse consequences on people’s quality of life and longevity. In a perfect world, perhaps everyone would have an ideal body mass index and be fit. I certainly wish I could click my heels and instantly lose a few pounds myself!

Although we can all agree about the desired ends, the means to get there are more controversial, especially when it comes to public policy and economics.

Obesity used to be a personal issue that one dealt with by following a diet, exercising and joining Weight Watchers. Nowadays, it’s become a “collective” issue that presumably concerns us all. And so we are increasingly being bombarded by numbers and policy proposals in the name of solving it.

One estimate puts the annual “burden” of obesity on the Canadian economy at close to $4 billion. This evaluation betrays a strange conception of what the economy is.

One could say that having to eat three times a day is a burden on the economy, since we would not need to devote so many resources to producing food if we could go without it. The fact that humans don’t have the amazing eyesight of the eagle is a burden on the economy: think of all those billions spent on glasses, contact lenses and laser surgery that could be spent on other things! The fact that we generally prefer colours to black and white also drives up the costs of countless products. Anyone concerned about that?

Fundamentally, we produce and exchange things because the world is not perfect and we have to answer all kinds of needs to better our lives. Excess weight is part of this reality and it makes no sense to talk about it as a “burden” on the economy. The economy would not exist if we were godlike beings without needs and wants. We should rather be happy that we are prosperous enough to devote economic resources to dealing with this human imperfection, among many others.

Now, that’s not to say nothing should be done about it and we should simply accept it as a given. Especially when it is getting worse in all developed countries. But any solution has to conform to economic logic to be effective.

The most popular solution now being offered to the problem of obesity is to impose taxes on unhealthy food. Just last week, a coalition of health and education experts repeated their call for the Quebec government to introduce a sugar tax on soft drinks and so-called “energy drinks.” Elsewhere in North America, groups have also been calling for the introduction of taxes on junk foods and fast foods that contain more than the recommended daily intake of fat, sugar, sodium and calories. These could include potato chips, chocolate bars, french fries, hamburgers and pizza.

The model for anti-fat activists is of course that of the fight against tobacco. You increase the price of a good, demand consequently goes down, and voilà!, the problem is solved. It seems to make perfect economic sense.

In the case of tobacco, it certainly contributed to the sharp decrease in the proportion of smokers in recent decades, because there are no obvious alternatives to cigarettes. It did however predictably lead to the widespread sale of contraband cigarettes, the only alternative to taxed cigarettes.

A tax on some foods containing a lot of fat and sugar, if high enough, will probably force people to modify their consumption habits at the margin, by buying fewer of the taxed items and more of others. Anti-fat activists hope and believe that they will buy more healthy food instead. But unless they’ve made the conscious choice to change their eating habits — and they can do this anytime, with or without those taxes — the end result likely won’t be different.

It may even be worse. In the case of people with modest revenues who tend to eat more fast food and junk food, the tax will mean less money in their pockets to spend on food in general. That may push a lot of them to buy not more fruits and vegetables, but even lower quality and cheaper food. And it probably won’t convince them to exercise more.

Imposing punitive measures such as taxes is simply not an optimal public policy solution for complex problems. The factors that influence excess weight are varied, but fundamentally, they all come down to a conscious and deliberate decision to eat more and to not exercise enough. Unless we want politicians and bureaucrats to micro-manage people’s lives against their will, we will need a more realistic and long-term approach to change our eating habits.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute.