Taxing Unhealthy Foods Is More Effective Than Subsidizing Healthy Foods

A new study published in Psychological Science concludes that taxing foods is more effective in reducing consumption of unhealthy products than subsidizing healthy foods. Researchers at the University at Buffalo studied the purchasing habits of 42 mothers from different social economic backgrounds in a simulated grocery store by increasing the prices of unhealthy foods by “12.5%, and then by 25%” and discounting “the price of healthy foods comparably.”

The study found that “taxes were more effective in reducing calories purchased over subsides. Specifically, taxing unhealthy foods reduced overall calories purchased,” while “subsidizing the prices of healthy food actually increased overall calories purchased without changing the nutritional value at all. It appears that mothers took the money they saved on subsidized fruits and vegetables and treated the family to less healthy alternatives”:

Taxing foods had the dual benefit of reducing purchases of HCFN [High-Calorie-for-Nutrient] foods while increasing purchases of LCFN [Low-Calorie-for-Nutrient]foods with lower energy density. From a public-policy standpoint, this strategy had the additional benefit of generating significant tax revenue. If policymakers aim to reduce consumption of HCFN foods to control rising rates of obesity, then taxing these foods may be more effective than subsidizing LCFN foods. In our experiment, a tax that increased the price of HCFN foods by 10% reduced total calories purchased by 6.5%, as a result of a reduction in fat and carbohydrate calories of 12.8% and 6.2%, respectively.

Lawmakers have taken food taxation off the table, but raising additional revenue by taxing consumption of public health hazards would reduce consumption of less healthy foods and offset the costs of poor eating habits (or help fund other priorities). For instance, in 2005, the federal government “pulled in about $8.9 billion from alcohol excise taxes.” By comparison, the economic and social costs of drinking burden “society with an estimated $184 billion per year in health care, criminal justice, social services, property damage, and loss of productivity expenses.”  The study also notes that since 1983, “prices of fresh fruits and vegetables, all fruits and vegetables, fish, and dairy products increased by 190%, 144%, 100%, and 82%, respectively, whereas prices of fats and oils, sugars and sweets, and carbonated beverages increased at much lower rates — 70%, 66%, and 32%, respectively.”