Taxing fast food will lose us money, not make it


As Spencer pointed out, there are reasons why taxing fast food to prevent obesity might not work. There's a larger point to make as well though. If taxing fast food did reduce obesity it would not save us money on health care costs: quite the contrary, it would increase the amount that we have to pay out of tax revenues.

I've looked at the American numbers in more detail elsewhere but the basic outline is quite simple. Assume that we are living in something very much like any of the European welfare states. Health care and pensions are paid out of tax revenue (that is the case pretty much anywhere in Europe). Then let us agree with those who say that obese people (that is, with a BMI of over 30, not just those like yuo and I merely well padded) cost more each year of their life in medical costs.

It isn't exactly a wild leap of faith to assume that those who consume more in health care are likely to die younger: one of (not the only of course) functions of health care is to prevent early death so not to see a connection there would be odd. And it is indeed true: the obese on average die younger than the non-obese. Those years of life not enjoyed stuffing fast food into oneself as a result of stuffing fast food into oneself tend, as is the nature of these things, to come at the end of one's lifespan. When one is retired and in recepit of, even in the US, both government paid health care and a government paid pension. People who die after pensionable age but before the average age of death save us money on that health care and pension.

A brutal thought, yes, but one that is still worth thinking. What we want to know now is whether the extra health care costs paid over the years are lower than, higher or the same as, the savings in health care costs made by not having thin pensioners. As a rough guide it seems that the savings from those years of not providing health care are a little less than the extra costs during life: add in the pensions and obesity is a net gain for the public purse. Just like smoking in fact which also provides a net gain to The Treasury.

There are of course other reasons to think about obesity as a bad thing: those lost years of life for a start. But in a purely monetary calculation, obesity does not cost us money, it saves us money. Thus while there may be other arguments to be used in favour of corralling us all into "eating healthily" the saving of money simply isn't one of them.