Estimating the potential of taxes on sugar-sweetened beverages to reduce consumption and generate revenue
Introduction
The concept of food and beverage taxes came into light with increasing concerns about obesity, particularly among youth (Brownell et al., 2009; Brownell and Frieden, 2009). Sugar-sweetened beverages (SSBs; beverages with any added caloric sweetener) have become a target of anti-obesity initiatives along with increasing evidence of a link between their consumption and obesity (Vartanian et al., 2007). Increased SSB intake is associated with weight gain and obesity (Vartanian et al., 2007; Malik et al., 2006) that translates into health, economic and social costs (National Center for Health Statistics, 2008).
Changing relative food prices through tax or subsidy policies is likely an effective and (for taxes) inexpensive public health instrument to improve nutrition. Prior research shows that changes in food prices can improve diet and weight outcomes, particularly among youth, lower income populations, and those at risk for obesity (Powell and Chaloupka, 2009; Smith et al., 2010). Experience from tobacco tax regulation highlights the power of price changes to affect purchasing behavior and public health (Jha et al., 2006). In addition to direct price effects on purchases, tobacco taxes have generated significant revenues that some states have used to support comprehensive tobacco control programs that further reduced smoking (Chaloupka, 2010).
Economic studies have examined the impact of prices on beverage consumption, consistently finding that higher prices lead to reduced consumption (Powell and Chaloupka, 2009; Smith and al., 2010). A recent review predicted that a 10% price increase for soft drinks would reduce their consumption by 8%–10% (Andreyeva et al., 2010). Researchers also looked at the impact of existing taxes on beverages. As of 2009, 33 states applied a sales tax on soft drinks, but rates were small (range, 1%–7%) and designed to generate revenue rather than influence consumption (Chriqui et al., 2008). In the few studies to date, such small taxes have shown little to no effect on beverage consumption and obesity (Powell et al., 2009; Kim and Kawachi, 2006; Finkelstein et al., 2010; Sturm et al., 2010).
Another approach to beverage taxation is an excise tax (a fee per beverage unit) that has received increasing consideration among legislators, public health advocates and the media. The Congressional Budget Office (CBO) suggested a federal excise tax of ¢3/12 oz on SSBs to fund health care reform and estimated its revenue as $50 billion over 2009–2018 (Congressional Budget Office, 2008). Several states and cities have attempted to institute an excise SSB tax, unsuccessfully so far. The most common proposal is a penny per ounce tax on beverages with added sweeteners (Brownell et al., 2009; Brownell and Frieden, 2009). Several states already impose small excises, license or privilege fees on beverage bottles, syrup, powder/mix that are paid by wholesalers, distributors, retailers and/or manufacturers (ImpacTEEN, 2009).
Accurate estimations of revenue from beverage taxes are important to public officials in budget planning, but also challenging methodologically. Deriving accurate estimates must include best possible precision on regional variation in beverage consumption, the expected impact on consumption, and historic trends. The aim of this paper is to offer a method for estimating revenues from an excise tax on SSBs and diet varieties that governments of various levels could expect immediately and in the future.
Section snippets
Consumption
State- and city-level consumption data are not available and should be estimated from national or regional data. We used gallonage (volume) industry data on 2008 regional consumption of carbonated soft drinks (CSDs), fruit beverages (not including 100% fruit juice) and ready-to-drink (RTD) teas. Data for sports drinks, flavored/enhanced waters, energy drinks, and RTD coffees was from the industry 2008 U.S. total sales. We determined beverage consumption across states by their share in the U.S.
Results
In 2009, U.S. per capita consumption of all non-alcoholic beverages (but milk) was 94.2 gal/year, including 45.0 gal of SSBs (Table 1). This translates into an average daily SSB intake of 15.8 oz or about 190 cal. Studies using dietary recall data reported on average 190 cal consumed daily from SSBs (Nielsen and Popkin, 2004). The highest per capita consumption among all beverages was for regular CSDs (31.2 gal) followed by bottled water (27.5 gal) and diet CSDs (14.2 gal). CSDs dominated the beverage
Discussion
We developed a method to estimate revenues from an excise tax on SSBs and diet varieties. Such taxes could help the nation and many states address serious budget deficits, both by generating considerable revenue and potentially decreasing health care costs from declining SSB consumption. Our model predicts that a national penny-per-ounce tax on SSBs could generate new tax revenue of $79 billion over 2010–2015. When applied to SSBs and diet varieties nationwide, this tax could bring $118 billion
Conflict of interest statement
The authors have no conflict of interest in regards to this paper.
Acknowledgments
This research was supported by grants from the Rudd Foundation (Tatiana Andreyeva and Kelly D. Brownell) and the Robert Wood Johnson Foundation to the Bridging the Gap program and ImpacTeen project (Frank J. Chaloupka).
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