When do fat taxes increase consumer welfare?

Abstract:

:Previous analyses of fat taxes have generally worked within an empirical framework in which it is difficult to determine whether consumers benefit from the policy. This note outlines on simple means to determine whether consumers benefit from a fat tax by comparing the ratio of expenditures on the taxed good to the weight effect of the tax against the individual's willingness to pay for a one-pound weight reduction. Our empirical calculations suggest that an individual would have to be willing to pay about $1500 to reduce weight by one pound for a tax on sugary beverages to be welfare enhancing. The results suggest either that a soda tax is very unlikely to increase individual consumer welfare or that the policy must be justified on some other grounds that abandon standard rationality assumptions.

journal_name

Health Econ

journal_title

Health economics

authors

Lusk JL,Schroeter C

doi

10.1002/hec.1789

subject

Has Abstract

pub_date

2012-11-01 00:00:00

pages

1367-74

issue

11

eissn

1057-9230

issn

1099-1050

journal_volume

21

pub_type

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