It is not even clear to me that there is either an externality or mistakes being made. If people are properly anticipating the risk, imposing the tax actually means that they will be eating "too little" of these "bad" foods. The problem is undoubtedly caused because the insurance premium doesn't vary with the risks that people take, but the most direct solution is to make them pay for their health care. I have two problems with the tax. 1) Not all individuals are likely to be equally affected by these unhealthy foods. 2) Even if everyone was about equally affected, how likely is it that the government would pick the right tax and not one that were "too high." On the other hand, it is much easier to know what the cost of the medical services are. Having a tax that is "too high" is just as bad as not having the right level of a tax.
Many adults in Canada oppose implementing extra taxes on specific foods in order to reduce both consumer demand and health problems, according to a poll by Angus Reid Strategies. 50 per cent of respondents think the proposal is a bad idea, while 43 per cent consider it a good idea. . . . .