Patrick Basham and John Luik: Tax won't cut fat of the land

Even the most ardent free-trader occasionally pines for an intellectual tariff protecting New Zealand from the importation of bad policy ideas.

Exhibit A is the burgeoning movement to fight obesity by greatly increasing the government's ability to regulate our dietary habits.

In response to heavier populations, the World Health Organisation is encouraging governments to introduce fast-food taxes. In this vein, Fight the Obesity Epidemic proposed to Parliament's health select committee that New Zealand adopt such a tax.

The pro-tax argument rests upon two flawed assumptions. The first is that energy-dense fast foods - especially those high in fat, sugar, and salt - are making New Zealanders obese. The second is that a fast-food tax will reduce consumption of these foods. Neither assumption stands up to serious scrutiny.

The scientific rationale behind taxing fast foods is empirically thin, at best. Simply put, these foods are not big contributors to obesity. Consider the results of several studies.

A study published last year in the Canadian Medical Association Journal examined 4298 schoolchildren. It found that pupils who attended schools dispensing softdrinks, and who ate in fast-food restaurants more than three times a week, were not at an increased risk of becoming overweight.

Two years ago, the International Journal of Obesity published research that found, in a study of over 14,000 children, that there was no relationship between fast foods and the children's weight. Research presented at last October's North American Association for the Study of Obesity conference found no statistically significant associations between dietary energy density and body mass index (BMI), the conventional measurement of obesity.

In March 2004, the journal Obesity Research published a study that found no relationship between the percentage of calories from icecream, baked goods, sweets, or crisps and adolescent girls' BMI scores. The researchers said these energy-dense snack foods had no bearing on weight status or changes in fatness during adolescence.

Research by scientists at Harvard University concurred that chocolate bars and crisps - so often blamed for the rise in childhood obesity - were not responsible for children gaining weight.

Even if there were scientific justification for a fast-food tax, the economic argument is so weak that the tax has no chance of achieving its policy goal. The economic argument is that a tax will reduce consumption of and thereby improve diets and overall public health. Yet a fast-food tax would be, at best, unsuccessful and, at worst, both economically and socially harmful.

There is no evidence that fast-food taxes alter people's eating habits. The latest economic research strongly suggests that a fast-food tax may be a futile instrument in affecting the behaviour and habits of the overweight and the obese.

A tax will not change the eating habits of those consumers addicted to fast food. Those consumers who strongly prefer fast foods will continue to eat and drink according to their preferences until it becomes prohibitively expensive to do so.

That is why the evidence from the three American states - Arkansas, Virginia, and Washington - that have had fast-food taxes for the longest periods, has found no reduction in the consumption of the taxed foods.

If policymakers act on the assumption that a fast-food tax will alter consumer behaviour, the social and economic consequences will be highly undesirable.

The United States Department of Agriculture's Economic Research Service has determined that a fast-food tax would be economically regressive. Low-income earners, who pay a higher portion of their incomes in sales tax but also consume a disproportionate share of fast food, would pay a disproportionate share of the tax.

Not only would a fast food tax not work, it is likely to prove counterproductive by increasing the amount of fast food eaten.

The Economic Research Service study contends that such taxes could lead some consumers to substitute equally unhealthy foods for the taxed food. A study by nutritionist Adam Drewnoski has shown that when food prices increase, lower-income people eat even less fruit and vegetables.

Given the weakness of the scientific and economic cases for the fast-food tax, it's no surprise that Kelly Brownell, the doyen of America's anti-obesity movement and the originator of the fast-food tax idea, has concluded that it is too inefficient and unwieldy to work properly.

New Zealand policymakers should send this empty idea back to the intellectual junk pile.

* Patrick Basham is director of the Washington-based Democracy Institute and John Luik is a health policy analyst. Their book Diet Nation: Exposing the Obesity Crusade is forthcoming from London's Social Affairs Unit.