The overall impact of a policy to tax junk food will

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overall. The overall impact of a policy to tax junk food will depend on how government uses the revenue raised by the tax, and more importantly, how it allocates resources saved in terms of health care expenditures avoided as a consequence of better dietary choices. In a study completed earlier this year, my colleague Melanie Toner and I examined the impact of a tax on the fat content of food. We examined the effect of the tax on dietary choices across different income groups and the implications for health care expenditures, worker productivity losses from diet-related illness, and tax revenue. We focussed exclusively on the costs associated with type 2 diabetes because it is an important diet- related illness and because we could obtain reliable data on that disease. We found that the optimal tax on fat – which translates into a tax on food types ranging from zero (on
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foods like broccoli) to about thirty-nine percent for very high-fat foods – would likely save around $2.1b in health care costs and $1.3b in productivity losses avoided, on a Canada-wide annual basis. We caution against placing too much faith in these numbers but our estimates provide ballpark figures for the potential savings from creating better dietary choices. Moreover, these values are only for type 2 diabetes, which is just one of
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