Don't Mess With Taxes

Are you still helping your kids finish up Halloween candy?

Enjoy it now. You might be paying higher taxes on next year's October treats.

A new study by a Washington, D.C., tax research group says more states are hiking tax rates on products such as candy and soda, ostensibly to fight obesity. And such fat taxes aren't limited to the United States, note two European lawyers who've written a paper examining the genesis, rationale and legal implications of national fat taxes.

These two reports, arriving as we Americans are gorging ourselves on sweets, are this week's Follow-up Friday feature.

The Tax Foundation's report Overreaching on Obesity: Governments Consider New Taxes on Soda and Candy says the U.S. trend to tax sugar-sweetened edibles and beverages is unlikely to have an impact on obesity rates and health outcomes.

What it will do, say Tax Foundation researchers, is create a complex and confusing classification system to divide the "good" food and drink products from the allegedly "bad" ones.

Each state has a different definition of which products fall under the category of candy for the purposes of taxation, notes the Washington, D.C., nonprofit, and these variations create complexity problems and make enforcement of and compliance with special food taxes difficult.

Other key Tax Foundation candy tax findings include:

• Seventeen states tax candy at a higher rate than other groceries, and four states collect an excise tax on soda.   
• In 2011, 14 states proposed new soda taxes (in some cases, raising product prices by as much as 264 percent). Two states proposed new candy taxes.   
• Soda and candy taxes do not necessarily decrease caloric intake. One recent study finds that when adolescents switch away from soda due to price increases, the drop in calories is offset by an increase in calories consumed in other food and drink.
• Excise taxes on candy and soda fall on all individuals who consume the products, even those who do so moderately.

Global weight, food tax concerns: Meanwhile, in Europe where a recent move by Denmark to tax foods containing saturated fat got a lot of global attention, a pair of lawyers has focused on the legality of product-specific taxes under European Union and World Trade Organization law.

Alberto Alemanno, an associate professor of law at HEC Paris, and José Ignacio Carreño García, a member of the trade team at Fratini Vergano, Brussels, also explore in Fat Taxes in the European Union: Between Fiscal Austerity and the Fight Against Obesity whether the EU might validly consider adopting an EU-wide fat tax.

Both reports offer a lot of food for tax thought. 

You also might find these items of interest:

• Lawmakers sweet on soda tax
• Fat tax hard to swallow
• Praising Pigovian taxes