Taxing soda drinks and fast food

In the U.S., average Body Mass Index (BMI) for men is 26, one point above the critical level. Given widespread growth of childhood obesity, policymakers in Washington have pondered the idea of levying a tax on soda drinks and fast food. The consumption of these products has negative impact on bystanders. Moreover, due to obesity, insurance premiums and costs of health care are rising. Each year, childhood obesity raises insurance premiums by $147 billion. In addition, childhood obesity is likely to become the major source of future growth of Medicare costs. Although the obesity pattern is the strongest and most significant in the U.S., Europe is not immune to widespread childhood obesity. The highest percentage of overweight children in Europe was found in Spain, Greece, Germany and in the UK. In general, obesity rates in Europe are catching up the U.S. level.

Academic studies have shown that the major factor of obesity among children and adults is excess availibility and low prices of soda drinks and fast food. In addition, large exposure of vending machines in schools also contributes to obesity through the consumption of candies and other high-calory products. For instance, an interesting study has examined the effect of vending machines on body weight. It showed that people with direct access to vending machines in schools and workplace gained cca. 3 kg more than those without access to vending machines. Therefore, is a tax on soda drinks and fast food a viable way to contain the growth of obesity?

Greg Mankiw has presented the economic point of view in NY Times (link). Generally speaking, the demand for soda drinks and fast food is price elastic, which means that a 1 percent decrease in the price of soda drinks would increase soda drink consumption by more than 1 percent. If government policymakers introduced a tax on soda drinks (fast food included), the burden of the tax would shift entirely on consumers who would pay the eventual cost of health care arising from obesity as a consequence of excessive consumption of soda drinks and fast food. That is why such a tax is feasible. There is no reason why the society should bear the burden of obesity through higher tax burden and rising cost of health care delivery. This is the most obvious evidence how society pays for private action that should be tackled by individuals themselves.