Generalized Nutrient Taxes Can Increase Consumer Welfare

Abstract

Certain nutrients can stimulate appetite making them fattening in a way that is not fully conveyed by the calorie content on the label. For rational eaters, this information gap could be corrected by more labeling. As an alternative, this paper proposes a set of positive and negative taxes on the fattening and slimming nutrients in food rather than on the food itself. There are conditions under which this tax plus subsidy system could increase welfare by stopping unwanted weight gain while leaving the final retail price of food unchanged. A nutrient tax system could improve welfare if fattening nutrients, net of their effect on weight, are inferior goods and the fiscal cost of administering the tax is sufficiently low. More data on the price elasticity of demand for nutrients as well as data on how specific nutrients affect satiety and how total calorie intake would be necessary before one could be sure a nutrient tax would work in practice.