The European Union Doesn't Need More Food Taxes
The World Health Organization ignores evidence price controls don't make people healthier.
In November 2012, a left-wing government in Denmark announced it would repeal a first-of-its-kind tax on high-fat foods that a right-wing government there had imposed. (Re-read that sentence. Let it sink in.)
As I wrote at the time, the so-called "fat tax" targeted "all foods containing more than 2.3 percent saturated fat, meaning it impacted not just potato chips but many popular foods considered by some to be healthy options—including meat, fish, dairy, eggs, avocados, chocolate, and nuts."
Along with repealing the country's so-called fat tax, the Danish government also announced it wouldn't move forward with the predecessor government's planned tax on sugar and sugary foods.
Why the reversal? The government repealed the tax and opted against imposing new ones for three primary reasons. First, the existing tax failed to raise money. Danes simply shopped elsewhere in Europe. Second, the tax cost jobs. Estimates put the number at more than 1,000 Danish jobs lost. Third, the tax failed to make Danes healthier.
In other words, the fat tax was an enormous failure by any and every measure. It would be difficult, seemingly, to design a dumber and more ineffective measure. That's why it's odd to see Denmark's fat tax front and center in a new World Health Organization report calling for still new food taxes in Europe.
The report, issued in Using Price Policies to Promote Healthier Diets, presents a new and equivocal view of Denmark's fat tax that betrays the WHO's ridiculous biases.
The fat tax wasn't a giant failure, the WHO claims. Rather, it "generated controversy in some circles where it was claimed that the tax was inefficient, ineffective and would generate unintended negative consequences."
It's true the fat tax "generated controversy in some circles where it was claimed" the tax was a failure.
"[B]arely a year after being implemented," one European free-market think tank report stated, "the tax was abolished because of the adverse effects it produced without any real impact on consumption habits."
But it also generated controversy in most circles, where reporters and experts painted it as as a failure—as reports in the Washington Post, The Economist, and The New York Times make clear.
Besides Denmark, the WHO report also looks at food taxes elsewhere in Europe. In each country the study highlights—along with Denmark, it looks at Hungary, Finland, and France—a key part of the purpose (sometimes the only purpose) of such taxes has been to raise government revenue. Hard data showing positive results are lacking. Not coincidentally, consumers and businesses opposed such taxes in each case.
Despite this opposition and the lack of evidence in favor of increased food taxes and the hard evidence against them—in the form of the failed Danish experiment—the report argues higher food taxes are not just "feasible" but a great idea.
"The economic theory presented at the beginning of this publication demonstrates that in circumstances where the consumption (or inadequate consumption) of food products is associated with a negative externality, pricing policies may be effective and efficient mechanisms to alter patterns of consumption," the WHO report concludes. "The available research evidence largely supports the economic theory in showing that changing the price of food can alter consumption in the desired direction."
The WHO authors appear to be targeting Poland as a possible trial location for trying out their economic theories. I hope they decide otherwise.
In a recent column, I used the failed Danish tax and other concrete examples to argue that socially engineering food choices doesn't work. That argument may generate controversy in some circles where it is claimed otherwise, like at the WHO. But outside of those offices, people refer to this as the truth.