People like the occasional Twinkie or bag of chips, and that’s fine. The problem in our food system is that unnecessary junk has become pervasive. I buy tomato sauce with no added sugar. It tastes better, but it’s hard to find. Sugar gets added to all kinds of things where it has no business being. Corn syrup, of course, is everywhere. Artificial colors, starches, refined everything, and lots of salt in things where salt is not needed. Unless something is significantly likely to cause cancer, we don’t keep it out of food. Being likely to cause obesity, heart disease, diabetes and other issues is not considered relevant. That hurts us, and the increase in medical costs under Medicare, Medicaid, and our insurance premiums costs us money.
I don’t believe in messing with people’s food lives, so bans are to be used with caution. But corporations are very good at responding to incentives, even small ones. If they can save five cents on each of a hundred million bags of whatever, that’s five million more dollars to the bottom line. That provides a good opportunity for a relatively low rate of tax to drive important behaviors.
What would happen if we put an excise tax on sugar and corn syrup used in producing other food items? (I wouldn’t tax the bag or bottle a consumer buys. If they are cooking for themselves, good for them.) What if we taxed salt just a little, so that chip makers would still use enough to taste good but maybe a little less than before, and the thing that didn’t need salt replaces it with a little healthy spice? What if we allow food colors, but make them more expensive to the manufacturer so that he re-thinks using them? What if we put an excise tax on manufacturers’ use of refined flour, but not on the more whole-grain stuff that tastes better anyway? The producers of all the junk ingredients would scream, of course, but it could improve corporate behavior substantially while still allowing them to supply the particular junky items that people especially like. They would just use less of the bad stuff, and stop using it in places like tomato sauce where it really doesn’t belong.
Part of the reason for not favoring heavy government regulation of food is that they don’t do it well. They get captured by food industry lobbies and push foods that aren’t supported by good science. Remember when we were supposed to eat margarine made of trans-fats to replace butter? Educated consumers can make their own choices. Tax nudging based on a list of things agreed after public hearings, though, is unlikely to go dramatically wrong. Scientists are pretty sure about a number of things that we’d do well to consume a little less of. Burden those things, and less of them will find their way into our diets. If the regulators burden some of the wrong things, we will still be free to use our own knowledge and eat the good stuff anyway.
Nobody that I know of has tried this strategy yet. They have, in the face of huge opposition from the soft drinks industry, tried imposing sugary drinks taxes. Those are basically a good idea, I think, but have a couple of flaws. First, the science shows that diet soft drinks have effects on the body similar to corn syrupy drinks, so the target is probably too narrow. Second, when you target a particular thing people like, it makes it easier for the company to rally their supporters in opposition. Put a tax on high fructose corn syrup used in food and a tax on artificial sweeteners and it will be harder for the companies to convince consumers that the evil government is interfering with their rights.
As it stands, poor people tend to get a particularly large fraction of their calories from unhealthy junk. Would taxes on unhealthy ingredients hurt the poor? It’s not clear that they would. As we know, we have a problem of obesity in America from people eating too many unhealthy calories, and that problem particularly affects the poor. Junk food is addictive and the body has a hard time processing it properly. If companies use slightly more expensive ingredients and charge a little more, the poor will likely be able to satisfy their hunger for less money, because they will have less addiction-driven hunger and less hunger driven by the body searching for missing nutrients. Further, if people buy a little less of the junk because the price goes up, that won’t hurt them, even if they don’t replace those excess empty calories with anything else. So, this is an area where we probably don’t need to worry too much about distributional effects. The proceeds of the tax could be applied to reduce the deficit.
It is worth noting that while one could earmark the funds towards something like funding early childhood nutrition programs, it can be counterproductive to do things like that. When you use a tax to discourage something, your hope is that the tax will produce less revenue over time, as people and companies change their behavior. If the proceeds of the tax are earmarked for dealing with a harm that will fade away as the relevant behavior changes, that’s fine. But the need for early childhood nutrition programs won’t disappear just because companies start using fewer unhealthy ingredients. If the nutrition programs depend on taxes on junk, the programs could lose funding when they shouldn’t. Where a discouragement tax is likely to have a significant effect on overall prices, it makes sense to offset it by reducing taxes on labor. Where a discouragement tax won’t have that kind of dramatic effect on consumers, then going overboard on specific earmarks would be a mistake. We currently have gigantic budget deficits that need to be reduced. Letting some discouragement taxes just apply towards reducing the deficits would serve an urgent need.