Mexico Tries Taxes to Combat Obesity(Wall Street Journal)
- Congress's lower house of Congress passed late Thursday a special tax on junk food that is seen as potentially the broadest of its kind, part of an ambitious Mexican government effort to contain runaway rates of obesity and diabetes.
- The House passed the proposed measure to charge a 5% tax on packaged food that contains 275 calories or more per 100 grams, on grounds that such high-calorie items typically contain large amounts of salt and sugar and few essential nutrients.
Comments from the article suggest that demand is relatively INELASTIC:
Héctor Ortega, a 45-year-old operator of a street stand in downtown Mexico City, predicted that consumers may pull back briefly when prices rise, but then return to their old habits.
"Just like the cigarettes, people will go back to their old habits," said Mr. Ortega. He said junk food was obviously unhealthy, but it was often the only thing that poorly paid office workers and students can afford. "This is a restaurant zone and the food here is expensive. For some people, these products are the only food available."
Fernando González, 24, an office worker who frequents Mr. Ortega's stand, is a big fan of sodas and gum, in particular. When the new prices kick in, he said, he won't give up on his favorites, but will probably buy less chips and candy.While the Quantity Demanded will decrease the question is will it decrease enough to achieve the policy objective?
"It's a craving, it's an addiction, it's something people enjoy," he said of Mexicans and their treats.
Consumers will pay a higher price for a smaller quantity. Producers will receive a lower price for a smaller quantity supplied.
The winner in all this? The government will gain tax revenue for certain. Are the revenues going for specific public health program(s) to counter obesity?
The snack food levy is part of a bigger tax proposal from President Enrique Peña Nieto which aims to raise the government's non-oil tax collections.Not....