Denmark has levied the world’s first “Fat Tax.” The tax is $2.90/Kg implemented on foods with a saturated fat content of over 2.3%. I had to question the rational of the implementation of such a tax and in contrast with Akash Patel’s post, I fully agree with this tax. There are many rational reasons that can be seen in support this tax. From a purely economic standpoint there is great deal of rational for taxing a high fat contentin food. Look at
http://www.nofinishlineblog.com/2011/10/denmark-slaps-fat-tax-on-food-what-should-we-do.html
the of the benefits principle. People who consume foods with high fat content are at higher risk for the need to use the medical services that are provided by the tax payers. Also taxes force a reduction in market activity. This in turn produces a dead weight loss within the market because of people force out of the market. At first this may seem like a negative but a reduction of activity in a market that harms people can actually be a good thing. This tax will effectively reduce the amount of fatty foods consumed and move the tax burned onto those who still choose to consume them as opposed to the general public. Food sin taxes work.