Why are Nicotine gum so expensive and McDonalds cheeseburgers so cheap?

Factual Questions
1

We are constantly presented with information concerning the dangers of smoking, a high fat diet, and obesity. However, I am amazed at how expensive Nicotine gum has become. When my mother was trying to quit smoking it was about forty dollars per box (she’s now deceased from lung cancer) and just tonight at CVS I heard a guy complaining about the sixty dollar price tag on a box of the stuff. One might think that the government would offer some sort of subsidy, or at least not tax the tobacco used to make the gum, and perhaps even exempt sales tax to encourage a lower price. Also, one might expect that there would be active public policy to encourage fast food places to have healthy foods that were not so much more expensive than the unhealthy ones ( two DB cheeseburges, a coke and frys go for about $3.50 whereas a grilled chicken sandwitch, a salad, and ice tea sell for about $7.50 at most McD’s for instance). The actual questions are as follows:

a. What if any taxation occurs on the tobacco that goes into Nicotine chewing gum? Has anyone examined eliminating this tax, and perhaps sales tax (and coorporate income taxes as well) on the sale of Nicotine gum? Considering that 90% of the negative health effects from smoking occur from the inhalation of tars ect, the money would be recovered even if people didn’t “wean” themselves from the gum (only recently have studies shown that Nicotine itself may promote cancer, but it is a relatively minor player when consumed orally as compared to smoking cigerettes).

b. Has anyone in public office seriously considered offering tax incentives to fast food places for selling healthier items? Perhaps, we could allow them to write off two hundred percent of the food expences on healthy foods such as grilled chicken sandwitches (no mayo added), and low fat salads ect. This would encourage them to price these items lower so that they could increase sales.

2

The above McD’s price should say two “single” rather than double cheeseburgers.

3

I believe most of the fast food companys were among the majority of corporations that paid no income taxes last year. So tax incentives wouldn’t mean much to them, since they’re already paying zero taxes.

4

This is just screaming for a cite.

5

a. Can’t tell you anything about the taxation arrangements for Nicotine gum, I’m afraid. I suspect that the difference in price has not a lot to do with tax and rather more to do with the facts that Nicotine gum is a pharmaceutical product, it’s mostly protected by patents and consumers are highly motivated. I smell fat profits! But all that is just a guess.

b. Taxation for health is not a new idea. The tax on cigarettes is an obvious example. But it’s tricky.

It would be possible to impose a graduated tax (or system of tax deductions) on food according to, say, fat and sugar content. There’s no reason to apply it only to fast-food outlets; why should McDonald’s be taxed differently from the only slightly swisher diner next door, or from the much swisher Michelin-starred restaurant in an entirely tonier part of town? For that matter, why should McDonalds be taxed differently from a grocery store? A food tax is both fairer and more easily administered if applied uniformly to food, rather differentially according to the outlet selling the food.

There are other objections to such a tax. Poorer families tend to spend more of their income on food, so a food tax will bear more heavily on them. And of course a food tax which penalises fat content will bear more heavily on people who need a higher fat content in their diet; namely, children. So from these perspectives the tax might be seen as regressive.

But the objections are not insurmountable. (If it is true that some significant food suppliers pay not income tax, then the food tax can be imposed through the sales tax.) If the political will was there, a “healthy” food tax would be possible, and the taxation of cigarettes is a precedent. But there are two important differences.

First, cigarettes are bad for you in any quantity, at any time, and they have no redeeming features, whereas food, of course, is basically good for you and is to some extent essential. This might mean that cigarette taxes are politically acceptable while food taxes aren’t.

Secondly, cigarette taxes generate enormous amounts of revenue whereas a food tax wouldn’t (because no government can substantially raise the overall cost of food), so governments would be less willing to put up with the storm of protest and lobbying which a food tax would certainly provoke.

6

A better question would be: why, in a capitalist, free market, democratic country, do you think this should be the government’s responsibility?

7

As a Libertarian/Conservative I deliberately phrased my question towards lowering rather than raising taxes. I already think that taxes are to high, so most approaches that I advocate will involve tax cut incentives, rather than threatened increases. Of course if fast food companies are already not paying income taxes then it would be difficult to offer them cuts. However, we could offer other incentives. For instance we could offer to halve any capital gains on their stock (on the part of share holders) for any fast food company that succeeded in doubling its sales of healthier foods (or exempting them entirely).

With regard to the Nicotine gum this is such a vital area of public policy that perhaps any “patents” should be shortened and competition facilitated. After all we are not talking about a next generation SSRI, it’s just nicotine folks ( granted the specific release method might be innovative).

8

This sounds like more of a debate than a question…

9

The question concerned why what seems like such an obvious public policy decision hasn’t put forth. My perspective was that perhaps it has and is simply not receiving the sort of attention that it merits. Then again maybe it hasn’t for good reasons (such as the fact that most fast food companies don’t pay taxes, if that is indeed the case).

10

IIRC most FF places are franchises and are small business, I find it very difficult to beleive that they do not pay fed tax, and know that at least in NY they pay state tax (even sub-s corps have to pay NYS tax though it is a flat $100). I think this whole corp’s don’t pay tax is either a political propaganda statement, or a statement that the cost of this tax is really payed by the consumers through higher prices.

Food is tricky as someone who is on a carb based diet would not do good to get a double quarter pounder, due to fat, but on a low carb diet w/o the buns and ketchup that could be a healthy choice.

Is it possible for a non-smoker (kid) to get addicted to nicitine through the gum, perhaps keeping the price as high as cigerettes (which smokers are used to paying anyway) would prevent kids from starting.

And I don’t find McD’s cheap, for what you get I find it rather overpriced, expecially the new salids.

11

To me this whole question seems to be simple economics.
The Cheeseburger and fast food market is highly competitive. You have Burger King, McDonalds, Wendy’s, Jack’s, A&W, Roy Rodgers, and numerous local places selling very similar products. The costs of entry into the market for burgers is low (you don’t need to pay patent fees on the cheeseburger, but if you open a chain you pay franchise fees), and the supplies (patties, onions, tomatoes, buns) are relatively cheap and easy to find. Since the market is highly competitive you have to price accordingly with your competitors and usually this is good for consumers (not in the calorie sense, but in the sense of increased utility from the eating of the cheeseburger). The more nutritious sandwiches and salads sold at these places usually use better and more expensive ingredients (real onions instead of reconstituted onions, things like that) and right now in our society there is an increased demand for healthier food and people are willing to pay a premium for this. This makes the McDonald’s salad more expensive than the burger.

In the case of a nicotine gum, you are dealing with an over the counter medical product, there are probably patent fees involved (I’m speculating, and not sure if the patent has run out), and right now in our society there is a trend towards banning smoking in many places, a PR campaign in local and national media saying that it is bad, and lots of people trying to quit who cannot go cold turkey without relapsing. The gum assists with the nicotine cravings, because of this reason there is higher demand, hence the higher price.

The OP seems to imply that the government should do something about this, and I don’t think that is a good idea. It is annoying to me when I go into a grocery store and have to pay a lot more for fresh vegetables than canned, and fresh chicken instead of bad for me chicken nuggets, but I work with the government on a number of projects and I’m sure I don’t want them regulating pricing on everything (I realize they do this on some things, ie milk, gasoline) based on what they perceive as the level of consumer utility provided by those products.

Mike