Health Economics Letter
WHEN DO FAT TAXES INCREASE CONSUMER WELFARE?
Article first published online: 2 SEP 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Volume 21, Issue 11, pages 1367–1374, November 2012
How to Cite
Lusk, J. L. and Schroeter, C. (2012), WHEN DO FAT TAXES INCREASE CONSUMER WELFARE?. Health Econ., 21: 1367–1374. doi: 10.1002/hec.1789
- Issue published online: 2 OCT 2012
- Article first published online: 2 SEP 2011
- Manuscript Accepted: 19 JUL 2011
- Manuscript Revised: 22 JUN 2011
- Manuscript Received: 18 JAN 2011
- fat tax;
- sugary beverage;
- willingness to pay
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. Copyright © 2011 John Wiley & Sons, Ltd.