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Taxes On “Fatty Foods”, And Their Unintended Consequences – Forbes

November 28, 2012

By George Pieler & Jens Laurson

Larry Summers wants to tax ‘junk foods’ citing “overwhelming evidence” of their negative health effects. Mr. Summers should look abroad first. Denmark is abandoning its effort to engineer a slimmer people while filling government coffers: It’s the end for their fat tax on foodstuffs exceeding 2.3% saturated fat content, imposed only last year. So what went wrong?

Little that wasn’t predicted and predictable: The tax drove people to cheaper, lower quality, occasionally less fatty alternatives. And it drove Danes, quite literally, across the border to nearby Germany or Sweden to get their favorite foods. Danish television meanwhile scored high with a cooking show that extolled the virtues of butter.

But do-gooder politicians have yet to repeal any tax just because it is not working, or impeding the daily lives of citizens. The fat tax was instead fried by Danish farmers complaining of the high administrative cost of fat-tax compliance, and losing business to foreign competitors who were running away with the bacon and the kringles. A planned Danish sugar tax has, for the same reasons, been shelved for now.

Even then, no tax will just disappear: Danish politicians plan on filling the $200 million revenue gap left by the fat tax by raising the income tax. That’s richer than those tax-threatened cheeses, since the fat tax came in addition to other taxes, without offsets. Yet the new income tax hike is marketed as offsetting lost revenue! That confirms this tax scheme was never more than a tax-hike masquerading as a public health measure.

via Taxes On “Fatty Foods”, And Their Unintended Consequences – Forbes.

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