Want People to Lose Weight? Tax Them
Subject Taxing behavior to modify preferences
Topic Utility and Consumer Choice
Key Words Utility, Choice, Preferences, Lump-Sum Tax, Social Cost, Tax Refund
News Story

Obesity has become a significant problem in our society. While medical reasons exist for obesity, many people lack the will power to alter their eating habits. Obesity is quickly becoming a social problem though; a recent study calculated the cost of overweight Americans in terms of the increased burden on health programs to be about $250 per person per year in America.
Proposed solutions such as taxing fatty foods, reducing fat content in food, or reducing serving sizes (while not reducing prices) do not have the desired outcome because they all may harm non-obese people as well. Instead, why not tax obesity outright? That is, tax everyone the same amount - impose a lump-sum tax - and put the proceeds into a fund, out of which can go refunds to people who have met certain requirements regarding weight, eating habits, etc. Those not meeting those requirements would end up supporting those who do end up altering their eating habits.

(Updated August 27, 2003)


What does this article imply is the marginal utility of receiving the tax refund relative to the marginal utility of that extra doughnut eaten? Explain.

2. Why would an overweight individual have an incentive to pay the tax but not change his/her eating habits? Explain carefully.
3. Will this solve the problem of obesity? Why or why not?
Source Daniel Altman. "Tax Policy that Uses Economies of Scales." The New York Times. July 13, 2003.

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