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Research Article

Income-Expenditure Elasticities of Less-Healthy Consumption Goods

Growing American waistlines are stressing public health expenditures. By 2030, total health care costs attributable to obesity could reach $956.9 billion, or as much as 18 percent of total US health care costs (Wang et al., 2008).

While the consumption of alcohol and tobacco have received a great deal of attention in the economics and health literatures, consumption of other unhealthy goods, such as soda, candy, chips, and other snack foods, only recently have begun to draw the attention of researchers. Consequently, we know little about the impact selective excise taxes may have on consumers of these goods.

In this study, we explore the characteristics of households that consume 12 less healthy goods—alcohol, cigarettes, fast food, items sold at vending machines, purchases of food away from home, cookies, cakes, chips, candy, donuts, bacon, and carbonated soft drinks. Specifically, we focus the effects on consumption of income. We calculate income-expenditure elasticities to quantify the extent to which expenditures on such goods vary with income.

William F. Shughart II is Research Director and Senior Fellow at the Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, Editor-in-Chief of Public Choice, editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination, and co-author of the Independent Briefing, Plastic Pollution: Bans vs. Recycling Solutions.

Adam J. Hoffer is an assistant professor of Economics at the University of Wisconsin–La Crosse specializing in political economy, public choice, and public finance.

Michael D. Thomas is Assistant Professor of Economics at Creighton University.

Rejeana Gvillo is with the Department of Economics, University of Memphis, Memphis, Tennessee.

From William F. Shughart II
TAXING CHOICE: The Predatory Politics of Fiscal Discrimination
So-called “sin taxes”—the taxing of certain products, like alcohol and tobacco, that are deemed to be “politically incorrect”—have long been a favorite way for politicians to fund programs benefiting special interest groups. But this concept has been applied to such “sinful” products as soft drinks, margarine, telephone calls, airline tickets, and even fishing gear. What is the true record of this selective, often punitive, approach to taxation?

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