STATS ARTICLES 2009

2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003

Will a soda tax reduce obesity?
Trevor Butterworth, October 5, 2009

Public health experts are arguing that a tax on sugared soda could help curb obesity; economists aren't so sure.

The momentum for federal taxes on soda is growing. President Obama recently said he thought Congress "should be exploring" the idea of a tax on sugared drinks as a way of tackling the nation’s ever-expanding waistline. Thomas Frieden, the president’s nominee for director of the Centers for Disease Control and Prevention, argued in an article for the New England Journal of Medicine last April that "a penny-per-ounce excise tax could reduce consumption of sugared sodas by more than 10%."

And now, in new paper in the New England Journal of Medicine, Kelly Brownell, Director of the Rudd Center for Food Policy and Obesity at Yale, and a bevy of public health experts, reiterate the litany of studies correlating our increasing girth to our increased appetite for sugared soda. In “The Public Health and Economic Benefits of Taxing Sugar-Sweetened Beverages,” they argue that the government should intervene in the market because people do not appreciate the health consequences of drinking soda and, in particular, children’s thirst for instant gratification prevents them from appreciating the potential long term harm.

A tax on soda, therefore, seems like a no-brainer. "If it costs more, people will drink it less," as Frieden has said.  But is it actually that simple? Those who advocate taxing soda as a way to tackle obesity often point to cigarette taxes as a model for success. The relationship between smoking and cancer is linear: if you smoke, you increase your risk of lung cancer by 1,000 percent; if you smoke two or more packs a day the risk is even greater - 1,500 to 2,500 percent - and you also increase your risk of other cancers too. So, when you impose punitively high taxes on cigarettes, you see both a decline in the number of cigarettes sold and a decline in cancer rates.

The problem is that it's not clear whether there is a similar linear relationship between soda and obesity, or that one can be established without first taxing sugared soda out of existence and then assessing the impact on the nation's waistline. Our consumption of soda may have increased, per capita, by 500 percent over the last 50 years, according to the Department of Agriculture, but that still only represents 7 percent of our collective energy intake.

It may be that you can happily drink soda without gaining weight, while I might stop drinking soda and, sadly, lose nothing. And how much of a tax increase would lead to a meaningful reduction in consumption – and would that, in turn, lead to meaningful changes in diet and weight? More to the point, if the demand for soda is highly responsive to changes in price, am I going to switch to drinking something that replaces the calories I would have got from soda?

These questions are far from academic; and yet, while there has been a great deal of research tying soda consumption to weight gain, there has been a surprising dearth of research on whether soda taxes work, even though they have already been implemented in 33 states (indeed, the five most obese states - Mississipi, Alabama, West Virginia, Tennessee, and Oklahoma - all have soda taxes, while three of the least obese, the District of Columbia, Massachusetts, and Colorado, have no soda taxes). But two new studies by a trio of researchers - Jason Fletcher, a public health expert at Yale, and David Frisvold and Nathan Tefft, economists, respectively, at Emory and Bates - mine real-world data to provide some much needed insight into the debate.

In "Can Soft Drink Taxes Reduce Population Weight" (which will be published in Contemporary Economic Policy), the authors examined how changes in states' taxation rates from 1990 to 2006 affected body mass index (BMI), a measure of body fat based on height and weight. They found that a one percentage point increase in the tax rate was associated with a statistically significant decrease of 0.003 points in BMI. (To put this into context, the National Institutes for Health defines a person as having a normal weight if their BMI is between 18.5 and 24.9, and obese if their BMI is 30.0). As the researchers note, even a large tax increase of 20 percentage points might not have a substantial effect on population weight.

They also did a “back-of-the-envelope” calculation suggesting that a 58 percent tax on soda, which is equivalent to the average federal and state taxes on cigarettes, could lead to a reduction in the mean BMI in the U.S. by 0.16 points. This, if not trivial, is probably not politically viable: New York's governor, David Paterson recently failed to push through an 18 percent tax on soda through the state legislature, and its hard to see Congress voting for a tax increase so high it would actually “kill” demand for the product.

“I think that we don't yet know what tax level is politically possible at the state or national levels, but soda taxes that have so far been implemented are not large enough to yield the desired reduction in weight,” says Tefft via email.  One could argue that caffeine addiction in part drives the demand for soda, but again, there may be other desirable caffeine containing substitutes like energy drinks or coffee. We don't have evidence on taxes large enough to do so, but this could ‘kill’ the taxed products.”

In a second paper, which is under review for publication, Fletcher et al. looked at the impact of soft drink taxes on children and adolescent consumption and weight. While they found a moderate decrease in consumption, it was offset by children switching to higher calorie whole milk and other sweetened drinks. This may be a more nutritious development, but it did not lead to any weight loss. "The evidence to date," they write, "is that soft drink taxes are ineffective as an 'obesity tax.'"

Other research into taxing snack foods has produced similar evidence that modest tax increases mostly fatten government coffers. Fred Kuchler and other economists at the U.S. Department of Agriculture examined how various snack tax proposals would affect consumption of potato chips, which consumer data shows are bought by over 90 percent of American households. After controlling for a huge range of factors, they concluded that the demand for potato chips was inelastic, meaning that consumers are not affected by small changes in price.

With this in mind, they estimated the effects of a 1 percent, 10 percent, and 20 percent tax increase on household demand. A 1 percent tax increase on potato chips would, they calculated, reduce annual household consumption by just .71 ounces – or a grand total of 42 calories per person. Widen the tax to 20 percent on all salty snacks and – assuming people didn't switch to eating anything else – the average person would theoretically lose less than a quarter of a pound in weight over a year.

Of course, none of these studies measures the possible impact that taxation might have as a way of warning people about the links between soda and diet and obesity. Nor do aggregate statistics tell us how individuals might be affected or respond. One interesting problem, which STATS put to Tefft, is whether tax increases would be least effective against those who consume the most soda. The analogy here is with alcohol. Tax increases tend to affect moderate drinkers far more than hardened drinkers.

“This is an area of ongoing research, so we don't yet know the answer to this question,” he says. “I would guess that we might see a larger response among ‘heavy’ soda drinkers than we do in the case of alcohol since, depending on the tax, there may be more readily available substitutes. For example, if only sugared soda is taxed then it might be relatively easy for heavy soda drinkers to switch to diet soda. If all soda is taxed then heavy soda drinkers could switch to other caffeinated or sugared beverages. On the other hand, a tax on all alcohol is unavoidable if an individual is interested in the alcohol content itself.”

The urgency with which some public health experts advocate soda taxes speaks to how obesity has become a formidable, and seemingly intractable, public health program. But their focus has tended to be long on the health benefits of reducing soda intake and rather short on whether tax increases will actually achieve this goal – something the latest New England Journal article acknowledges, albeit briefly, in its conclusion.

The temptation, of course, from a government perspective, is to see obesity as a good way to reduce bloated government deficits; but it would be ironic indeed if soda taxes turned out to be as nutritionally empty as the product they’re trying to curb. As Tefft puts it, economists have a lot to offer in this debate “in the form of empirical evidence.”

A shorter version of this article appeared first on Forbes.com


Digg!

Technorati icon View the Technorati Link Cosmos for this entry