When government gives us more, can it tell us what to do?
During October, 2011, Denmark became the first country in the world to have a fatty foods tax. Targeting all foods with more than a 2.3% saturated fat content, the list included butter, pizza, potato chips and even meat and milk. With a price hike of approximately $2.70 per 2.2 pounds of saturated fat, a half pound of butter sold for an extra 37 cents.
Then, the unintended consequences entered the picture.
It actually all started before the tax hit when rumors spread that people were hoarding butter and demand soared for foods high in saturated fats. Afterwards, rather than change their eating habits, some families switched where they shopped. One cheese eater said that several times a year, she stocked up at a German food shop across the border. Others purchased lower quality cheeses. Meanwhile companies reported that tax compliance required costly administrative expenses. The Danish Food Workers Union complained of 1300 job lay-offs in retailing and manufacturing.
Perhaps because of the tax’s economic impact, Danish officials soon changed their mind.
Saying, “Now we have to try improving the public health by other means, ” Denmark’s minister for food, agriculture and fisheries announced during November 2012 that the tax had been repealed. Government officials added that they will also cancel plans for a tax on sugary drinks and cut their beer tax. Lower taxes, they hoped, would boost GDP.
The Denmark story takes us back to government.
In the US, with the passage of the Affordable Care Act, increasingly, though not nearly as much as Denmark, government is paying for health care. One economist friend of mine commented that our relationship with government has shifted. The more government gives us, the more it can tell us what to do. Your opinion?