BACKGROUND
Taxes on unhealthy products are often implemented as “sin taxes.” Historically, the primary objective has been to increase revenue. In recent years, “health taxes” on sugar sweetened beverages (SSB) have been supported by many public health professionals as well as national and local governments. In contrast to previous sin taxes these measures are implemented as (1) a policy to decrease drinking, (2) increase awareness of the health hazards of SSBs and (3) increase revenue for health- related interventions and reforms. Sugar sweetened beverages include all beverages with added caloric sweeteners. The taxes are usually not applied to 100% juice, milk products, or artificially‐sweetened beverages. Seven percent of caloric intake in the United States is related to SSBs consuption. 1 In 2009, the Centers for Disease Control and Prevention listed reducing the intake of SSBs as one of its chief obesity prevention strategies. Higher consumption of SSBs been associated with increased obesity rates, development of metabolic syndrome and type 2 diabetes.
Economic Impacts
Increasing the price of SSBs is associated with a decrease in consumption and the higher the price increase, the greater the reduction. Studies in Mexico and New York show as the price of SSBs rises, the consumption of fruit juices and whole milk tends to increase. Interestingly, the consumption of diet drinks also decreases with SSBs. 3,4 It is currently not known why, but speculated the prices are equalized by merchants. Bonnet and Réquillart (2010)5 found in an analysis of EU Sugar Policy Reform, substitutions are mainly among products with similar sugar profiles. Products sweetened with sugar and other sugar-like sweeteners are substituted with lower priced sugar sweetened products rather than with a diet or non-sugar products. As well as, diet products substitute more with the other diet products than they do with sugar-sweetened products. For a health tax to be effective in curbing behavior in areas with medium to high GDP the tax must be above 20% of the price.6 Some evidence suggests that there are stronger health benefits with taxes that are fixed value based on the quantity, size or weight of the product. For example, tax rates based on the amount of sugar per product.6
Impact on Health
Health taxes have been shown to reduced overall daily calorie consumption. This reduction is higher in younger than older people and in low- than in middle- or high-income individuals. The benefit of a tax reducing the prevalence of overweight and obesity has been shown to be largest in males, aged 20-29 7 and among adolescents at risk of overweight. 8 There is no observed effect on youth with normal weight. 8 This may be due to the substitution of SSB with fruit juice and milk. The calories in these beverages could reduce the effect of price increases on SSBs; juice consumption has been associated with weight gain. Even so, a switch to milk and fruit juice would still come with a health gain as these drinks contain calcium and vitamins. Due to the increased consumption Juice and milk, it is estimated that a health tax would result in a 40% reduction in calories. This could reduce new cases of type 2 diabetes by 2.6 percent, the prevalence of obesity by 1.5 percent 9 as well as facilitate the reduction dental caries. 7 Over ten years, this would result in 95,000 fewer instances of coronary heart disease, 8,000 fewer strokes, 26,000 fewer premature deaths and more than $17 billion in savings from medical expenditures prevented in the United States. 9
Equity Issues
There have been concerns that SSB health taxes disproportionately affect low-income households. All studies of SSB health taxes show households will spend less on SSBs after a tax goes into effect. Advocates of the tax argue, this will provide low-income households with more disposable income for other purchases. It is also projected that greater health benefits will increase in low‐income consumers who on average consume more SSBs than higher income consumers. 9,10 Disparities in obesity outcomes should then decrease following implementation of the proposed tax. With this in mind, revenue raised from a SSB health tax should be reinvested in low income communities; as an example, in Berkeley, CA SSB tax revenue has been designated to be spent on school and community programs, most with a focus on low income or minority populations, to promote healthy eating, diabetes and obesity prevention.
Policy Recommendation
A health tax on SSBs will have a long-term positive effect on the reduction of diseases related to obesity including type 2 diabetes, coronary heart disease, as well as,, possibly other health effects that have been linked to SSB consumption, such as asthma. The positive health effects will be greater among low-income communities. In the short-term, the increased revenue from the taxes can be used to develop much needed health programs in low-income communities and offset costs of healthy food options. Despite the positive
References
1. Han, E and Powell, LM. Consumption Patterns of sugar Sweetened Beverages in the United States. Journal of the Academy of Nutrition and Dietetics 113.1 (2013): 43–53. PMC. Web. 25 Feb. 2018.
2. Vasanti, M., Popkin, BM., Bray, GA., Despr’es, JP., Willett, WC., HU, FB. Sugar-Sweetened Beverages and Risk of Metabolic Syndrome and Type 2 Diabetes. Diabetes Care 2010, 33:2477–2483.
3. Colchero, M. Arantxa, Salgado, J C, Unar-Munguía, M, Molina, M, Ng, S, Rivera-Dommarco, Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas. PLoS ONE. (2015) 10(12): e0144408.
4. Ruff, RR & Zhen, C. Estimating the effects of a calorie-based sugar-sweetened beverage tax on weight and obesity in New York City adults using dynamic loss models. Annals of Epi, (2015) 25(5): 350 - 357
5. Bonnet, C. & Réquillart, V., Does the EU Sugar Policy Reform Increase added Sugar Consumption? An Empirical Evidence on the Soft Drink Market, TSE Working Paper series, Reasearch Group: Food, Farms, Firms (2010) 10-197.
6. Wright, A, Smith, KE, Hellowell, M. Policy lessons from health taxes: a systematic review of empirical studies. BMC Public Health (2017) 17:583 DOI 10.1186/s12889-017-4497-z.
7. Briggs, AD, Mytton, OT, Kehlbacher, A, Tiffi, R, Elhussein, A, Rayner, M, Jebb, SA, Blakely, T, Scarborough, P. Health impact assessment of the UK soft drinks industry levy: a comparative risk assessment modelling study. Lancet Public Health 2017; 2: e15–22.
8. Fletcher JM, Frisvold DE, Tefft N., The effects of soft drink taxes on child and adolescent consumption and weight outcomes. J Public Econ. (2010) 94(11):967–974.
9. Wang, YC, Coxson, P, Shen, YM, Goldman, L, Bibbins-Domingo, K. A Penny-Per-Ounce Tax On Sugar Sweetened Beverages Would Cut Health And Cost Burdens Of Diabetes. Health Affairs (2012) 31(1): https://doi.org/10.1377/hlthaff.2011.0410.
10. Finkelstein EA, Zhen C, Nonnemaker J, Todd JE. Impact of Targeted Beverage Taxes on Higher- and Lower-Income Households. Arch Intern Med. (2010) 170(22):2028–2034. doi:10.1001/archinternmed.2010.449.
