By: Ryan Holland

A recent blog post in the Washington Post discussed the potential of Denmark’s new fat tax. The tax is about $6 per pound of saturated fat- the stuff of butter, red meat, cream, cheese, basically anything that’s deliciously greasy.

Certainly the tax will bring in some much-needed revenue, but will it actually change eating habits? Probably not. Spending on food is highly inelastic (since there are no substitutes for eating) and unhealthy foods, sadly, are usually the cheapest. If you assume that most people who consume unhealthy foods on a regular basis are doing so because they are minimizing costs, then the only way to change eating behavior is to tax fatty food until it is more expensive than fresher, healthier food.

Several studies mentioned in the article have confirmed that taxes on food have to be relatively high to change behavior. One study found that a tax on soda would have to be at least one cent per ounce to reduce consumption, which would mean a rate as high as 100 percent for generic brand 2-liters. Another found that a 50 percent tax on solid foods reduces consumption by only 3 percent.

The main problem with such high taxes on unhealthy food is that it disproportionately affects lower class eaters. We know that poverty is positively correlated with unhealthy eating, but the elasticity of demand is less understood. If the poor eat fatty foods because they are cheapest, a high enough fat tax should change behavior. If on the other hand they eat poorly out of habit, taste preference, or culture, a fat tax may only be a regressive source of federal income.