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Navajo Nation: High Taxes on Junk Food Are Justified


 Food desert

“Government intervention, including taxation, is justified when the market fails to provide the optimum amount of good for a society’s well-being.”*

The question of whether or not we can tax our way to good health has been bandied about for years. Opponents say such taxes (often called sin taxes) unfairly target certain industries, such as tobacco, soda, and alcohol. Perhaps worse, they say they reek of paternalism (if you can’t stop yourself from consuming stuff that’s bad for you, we’ll help you stop).

Proponents say the benefits of such taxes are twofold:

  1. They can curb consumption by increasing the cost of certain products.
  2. They can raise revenue to battle the ill effects of over-indulgence, such as cancer from tobacco use, alcoholism and related diseases from alcohol consumption, and diabetes and other health problems from too much soda and sugary, fatty foods.

Real life scenarios

Mexico imposed a tax of roughly 6-cents per liter on sugar-sweetened drinks in January 2014. Evidence to date suggests that it is, in fact, curbing consumption of the drinks subject to the tax. It is also raising revenue. But it is too early to tell if it will positively impact the health of Mexicans, who are the largest consumers of soda in the world.

Berkeley, California has taxed sugary beverages (1 penny-per-ounce) since January 1, 2015. The tax is raising revenue but, as with Mexico, it is too early to tell if it is curbing consumption.

The greatest experiment by far is underway right now in parts of Arizona, New Mexico, and Utah, in the 27,000-square-miles that are home to the Navajo Nation.

Nutrition matters

In November 2014, the Navajo Nation Council voted 10 to 4 in favor of the Healthy Dine’ Act of 2014, which imposes a 2% tax on the “gross receipts from all minimal-to-no-nutritional value food items sold….” The 2-cent tax imposed on these products is in addition to the 5-cent sales tax that applies to most of the items.

Unlike the taxes in Mexico and Berkeley, which are exclusively on sugary beverages, the tax imposed by the Navajo Nation targets a wide variety of foods with little or no nutritional value. Many foods qualify. According to the Act:

“Minimal-to-no-nutritional value food means sweetened beverages and prepackaged and non-prepackaged snacks stripped of essential nutrients and high in salt, saturated fat, and sugar including sweetened beverages sweets, chips, and crisps.”

Encourage healthy habits

In addition to increasing the tax on what we’ll call poor choice foods and beverages, the Navajo Nation on October 1, 2014, eliminated the sales tax on fresh fruits and vegetables. And by fresh, we mean fresh.

The tax exemption applies to the following:

  • Fresh fruits
  • Fresh vegetables
  • Nuts (some, not all)
  • Nut butters (some, not all)
  • Seeds
  • Water

The exemption does not apply to the following:

  • Apple sauce
  • Canned fruits/vegetables
  • Dried fruits or vegetables
  • Dried mushrooms
  • Frozen fruits and vegetables with additives of any kind
  • Frozen meals
  • Fruit/vegetable juice blends
  • Pickled vegetables and fruits

For a more complete list and additional examples, see the Navajo Nation Public Ruling, Administration of the ‘Elimination of the Sales Tax on Fresh Fruits, Fresh Vegetables, Water, Nuts, Seeds and Nut Butters’ under the Navajo Nation Sales Tax.

Desperate measures

The high tax on junk food is not meant to be draconian. It is, rather, a desperate attempt to deal with a growing health crisis among Navajos, most of whom live in what the United States Department of Agriculture has identified as a “food desert, … an area, either urban or rural, without access to affordable fresh and healthy foods… [where] heavily processed foods are often readily available.”

The Healthy Dine’ Act includes information and statistics on the state of health among the Navajo Nation. It includes:

  • 25,000 Navajos have diabetes
  • 75,000 more are pre-diabetic
  • 31% of Navajo pregnancies in 2011 were complicated body mass indexes (BMI) in the overweight or obese range
  • It costs an average of $13,000 per person annually to treat diabetes
  • The cost to treat diabetes-related complications can exceed $100,000 per person annually

And so on.

Can sales tax turn it all around? It's a start, but proponents say much more work is needed—including making fresh fruits and vegetables available in the Navajo food desert.

* The British Medical Journal, as quoted in the Healthy Nation Dine’ Act.

 


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.