Posted December 2, 2007on:
You know the type of foods I’m talking about, chocolate bars, chips, V’s (I can see all this on my desk, looks like this tax will hit me pretty hard 🙂 ). If there is a social cost to the consumption of these types of goods we should tax them, and send the funds to the place where the externality will fall.
In this case, drinking too much V will lead to me needing to use health services more than I would have with no V. In order to ensure a socially efficient outcome, V needs to be taxed, and the money needs to be sent to the hospital. This will lead to me reducing my consumption of V (not likely) or paying the value of the negative externality I impose on society (my health care bill) or a mix.
Now this tax is on the consumption decisions of people, so the level of the tax will depend on how much we believe the consumption of V’s adds to the cost of running health care in NZ (or any other externalities it may cause). If we are so keen on taxing smoking, fuel, and alcohol, then why aren’t we taxing Moro bars and V’s?
Update: Here is an article that goes into (marginally) more detail about a fat tax.