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Bill Would Revoke Tax Breaks for Junk Food Ads

February 10, 2010 - by Donny Shaw

Yesterday, First Lady Michelle Obama announced a new initiative to reverse childhood obesity trends within the next decade by improving school lunch menus, helping to finance grocery stores to sell fresh vegetables in poor areas and encouraging more physical activity throughout the day. The plan will come at a cost; there are no official estimates yet, but, the school lunch initiative alone is expected to cost $10 billion over ten years.

Rep. Dennis Kucinich [D, OH-10] pounced on Obama’s childhood obesity announcement to promote a similar plan of his own. His plan, which he has introduced to Congress as H.R. 4310, has one big advantage over the Obama plan — rather than spending billions, Kucinich’s plan would actually produce billion in new revenues for the government while fighting childhood obesity.

Kucinich’s would amend the U.S. tax code “to protect children’s health by denying any deduction for advertising and marketing directed at children to promote the consumption of food at fast food restaurants or of food of poor nutritional quality.”

Under the current tax code (Sec. 162a), advertising is considered a business expense and is used by corporations to reduce their federal tax liability. According to the authors of a November, 2008 study by National Bureau of Economic Research with funding from the National Institutes of Health on childhood obesity and advertising, “since the corporate income tax rate is 35 percent, the elimination of the tax deductibility of food advertising costs would be equivalent to increasing the price of advertising by 54 percent.” Furthermore, eliminating the tax deductibility “would consequently result in the reduction of fast food advertising messages by 40 percent for children, and 33 percent for adolescents.”

In a press release, Kucinich cites an Institute of Medicine study (.ashx file) showing that food and beverage companies spent more than $10 billion in 2002 on advertising to children.
According to the authors of the NBER study, eliminating the tax break would “result in the reduction of fast food advertising messages by 40 percent for children, and 33 percent for adolescents.”

The mechanics of the Kucinich bill are fairly simple, but here’s a closer look:

First, all expenses — travel, goods or services, gifts, or other promotional expenses — would be specifically banned from tax deductibility if they are incurred for purposes of providing “any advertisement primarily directed at children for purposes of promoting the consumption by children of food from any fast food restaurant or of any food of poor nutritional quality.” Read this section of text in context.

The bill does not define “fast food.” It leaves that up to the Treasury Secretary, the HHS Secretary and the FTC (As a side note, the House health care bill attempts a definition of fast food: “a restaurant or similar retail food establishment that is part of a chain with 20 or more locations doing business under the same name (regardless of the type of ownership of the locations) and offering for sale substantially the same menu items.”)

But it provides this definition for the other crucial term — food of poor nutritional value: “the term ‘food of poor nutritional quality’ means food that is determined by the Secretary (in consultation with the Secretary of Health and Human Services and the Federal Trade Commission) to provide calories primarily through fats or added sugars and to have minimal amounts of vitamins and minerals.”

The bill seems like a natural compliment to the broader Obama initiative. What’s your opinion — should it be rolled in?

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Ivana 03/07/2012 10:48am

It’s really a no-brainer.

Why should we continue to subsidize the marketing of junk food in the midst of a health crisis driven by just these highly-palatable, engineered foods?

I just wish the bill would drop this part of the definition for “food of poor nutritional value” – AND TO HAVE MINIMAL AMOUNTS OF VITAMINS AND MINERALS.

Adding vitamins doesn’t somehow neutralize the damage caused by mega-doses of sugar and artificial trans-fats, much as the Dairy Council, Nabisco and Kellogg’s would like you to think.

This money could go a long way to getting school lunches free of sugar, “pink slime” and trans-fats. Hey, we might actually be able to feed kids REAL food for a change. Imagine what that might do to reduce our massive health costs.

becauseican 10/19/2011 4:07am

I doubt that eliminating the tax deductibility of marketing expenses directed at children of fast food restaurants will cause companies such as McDonalds to discontinue targeting their products at children. They are now advertising healthy choices such as milk, apples and carrots with their burgers and fries. Seems that advertising has now increased to show how healthy junk food is now…go figure !!?!?
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Clif9 02/10/2010 5:03pm

Here’s a challenge for the Sunlight Foundation – publish a list of all tax breaks for business and industry. It would run to more pages than the somnolent health bill, I bet.

I had no idea advertising could be used as a tax deduction. That means the taxpayer is supporting Madison Ave, a needy place for sure.

skeltoac 02/10/2010 10:08am

If advertising is an expense for milk, it’s an expense for Oreos. The tax code is a perfectly inappropriate place to couch nutritional advice.

Also, the government has no business setting standards for “what’s good for you” in nutrition or most any other realm.

Where did I leave my cigarettes?

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