Thursday, February 5, 2015

Tax Obesity?

Should we tax obesity? Although it's an older study, this article resurfaced on my twitter feed today. The focus is on how we can use taxes to modify behavior, including sin taxes on such things as cigarettes and alcohol. The author, Dr. Gruber, does point out that taxing obesity is trickier than these other specific items, and first makes a case for sugar-sweetened beverages.

In my opinion, there are good reasons to tax sugar-sweetened beverages. We should not tax sugar-sweetened beverages because of obesity. Sugar-sweetened beverages are not good for anyone, regardless of weight. Personally, I think these policies should be targeted to industry, not individual purchasers.

The next, idea, however, is "ultimately, what may be needed to address the obesity problem are direct taxes on body weight". As Dr. Gruber points out, it's hard to imagine this in federal tax policy, but we already do it through employer-sponsored insurance. Many others have made many arguments specific to employer-based health insurance, so let's think about this from a broader idea of "tax" of any form.

What is the motivation of a tax on obesity, be a tax on wages to the IRS or through health insurance premiums? In economics, the concept is that taxing something discourages consumption. This worked well for cigarettes--as taxes increased, consumption declined. (We'll set aside the much more complicated issues surrounding cigarette taxes.)

The problem is that most "sin taxes" target a behavior or an item. Taxing obesity would be taxing a characteristic. What would we need in order to actually implement an effective tax on obesity?

  • We would need to be able to target the tax, so we would need to be able to measure obesity. This measure would need to be easy to obtain and have a clear tie to the health issues we are concerned about. BMI is easy to obtain, and I guess people could report it on their 1040, but it is not clearly tied to health issues. In fact, the only measures tied to health issues are the existence of health issues. 
  • A tax would only be effective if it addresses something changeable. So, we would have to assume a perfect correlation between individual behaviors and weight. So, by changing a specific set of behaviors, you would lead to the exact desired weight. Of course, we know that doesn't happen.
  • A tax would also only be effective if it doesn't induce other risky behaviors. What good is a tax on cigarettes if everyone began to smoke an equally dangerous alternative? By taxing a specific weight, wouldn't the motivation be to do anything to reach that weight?

We can't tax obesity, because there is nothing about it that is taxable. Yet, this idea is regularly raised, in the popular press and in science. Obesity is a characteristic. There are no other characteristics I can think of that we tax. We do tax behaviors, but not what people look like. We also don't tax diseases. We tax cigarettes, but we don't impose a tax  when someone is diagnosed with lung cancer.

There are plenty of ways to leverage policy in order to improve obesity. Taxes aren't one. Taxing health insurance is not one. Health insurance is actually an important tool to help people obesity improve their health--why would we restrict that?We can only address obesity be recognition of what it is and by using policy to support individual efforts to improve their health, not to punish them.

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