Wednesday, July 28, 2010

Can Soft Drink Taxes Reduce Obesity?

One commonly heard propositions to combat the obesity epidemic is to tax soft drinks. No doubt, sugary soft drinks are a common and important source of “empty” calories, but will taxing soft drinks really reduce obesity rates?

This assumption was now examined by Yale University’s Jason Fletcher and colleagues, in a paper just published in Contemporary Economic Policy.

The researchers collected information on taxation of soft drinks with respect to specific excise taxes on soft drinks and other snack taxes, general state sales taxes, and special soft drink exceptions to food exemptions from sales taxes in several US States between 1990 to 2006. Height and weight data was used from the representative NHANES III data set.

Using complicated models accounting for a variety of potential confounders, the authors confirmed that state soft drink taxes have a statistically significant impact on behavior and weight; however, the magnitude of the effect is surprisingly small.

Thus, a 1% increase in the state soft drink tax rate leads to a decrease in BMI of 0.003 points and a decrease in obesity and overweight of 0.01 and 0.02 %, respectively.

There were also significant differences on how soft drink taxes affect different demographic groups. For e.g. a 1% increase in the soft drink tax rate decreases BMI by over 0.01 points for the lowest three categories (income below $20,000) and nearly 0.01 points for the highest category (income above $50,000).

In addition, The impact of state soft drink taxes is larger for females, middle-aged and older individuals, individuals with greater education, and varies according to race and ethnic categories.

The authors point out that soft drink consumption represents only 7% of the total energy intake and one should therefore expect only modest changes in population weight through soft drink consumption responses to small tax increases.

In fact, they estimate that even a 20% increase in soft-drink taxes would only lead to a mean BMI change of 0.06 points, although the impact may be somewhat larger for some demographic groups.

Indeed, even if soft drinks were to be taxed at around 58%, the current average taxation rate for cigarettes,
the researchers estimate that mean BMI in the United States would likely only decrease by 0.16 points and reduce the proportion of overweight or obesity in the population by 0.7%.

In comparison, the between 1990 and 2006, the average increase in population BMI in the US was around 2.3 points.

While the authors conclude that although the effect of increased taxation of soft drink may do little for obesity, they point out that there may be other health benefits, including improvement in dental health.

Additionally, an increase in the soft drink tax of this size would raise considerable revenue for the federal and state governments that could perhaps be used to implement other measure to address the obesity epidemic.

While the authors by no means wish to condone the increased consumption of soft drinks, their analysis clearly suggests that any hope that simply slapping a tax onto soft drinks will somehow reduce obesity rates appears unfounded.

AMS
Edmonton, Alberta

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Fletcher JM, Frisvold D, & Tefft N (2010). Can Soft Drink Taxes Reduce Population Weight? Contemporary economic policy, 28 (1), 23-35 PMID: 20657817

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5 Responses to “Can Soft Drink Taxes Reduce Obesity?”

  1. Wade Gieni says:

    This is interesting, if you were to impose this type of tax on sugary drinks (Pop, juice, energy drinks, etc.) and foods where the caloric count is greater that 500 calories or otherwise deemed “unhealthy” (high salt, high sugar content, etc.) and keep the funds generated within the food and health domain. The tax revenue could go to health and wellness programs, subsidized fitness programs for low-income people, subsidization of healthier foods, nutrition and physical education in our schools. I think this is how taxes should be used. Instead many of the programs cited in the study tend to go into the government general revenue stream so it is not surprising that the effect on overall BMI is not a larger decrease.

    Taxes and fees collected should always go towards the behaviour they are ment to modify.

  2. Arya M. Sharma, MD says:

    @Wade: This is a good point, but it is rare to see governments specifically targeting tax revenue from certain sources towards specific activities.
    AMS

  3. Max Peto says:

    Dr. Sharma begins his post by asserting that a soft drink tax is a commonly heard suggestion to “combat the obesity epidemic”. He then blogs about some of the findings of a paper evaluating the potential effectiveness of such a proposal. This referred-to paper was published by Jason Fletcher et. al. at Yale University.

    The details of this evaluation isn’t what shocked me, and I don’t think they’re even interesting enough to discuss here. My main concern regards the nature of the proposal. That is, anyone who suggests such a proposal is assuming some or all of the following premises:

    (1) Too many people are overweight for my liking. E.g. Overweight people are unhealthy, and I want other people to be healthy, for whatever reason.
    (2) The excessive drinking of soft drinks contributes excess calories to a person’s diet, and may contribute to making a person overweight.
    (3) People who engage in (2) are too stupid to see soft drinks as part of the cause of their excess weight.
    (4) People who engage in (2) are also incapable of modifying their own behavior to reduce their weight to a healthier level.

    And I think that the suggestion of such a tax implies the premise:

    (5) That overweight people are costly to others, via their higher medical costs, which are shared by others participating with them in a medical cost sharing situation, such as health insurance or universal health care.

    A proposition of such a tax is predicated on the conclusion that, given (1-5), the behavior of drinkers of excess soft drinks must be influenced by some other way – in this case, by making it more costly to purchase and consume soft drinks.

    First, even the discussion of such a tax is ridiculous to me because of the implied premise (5). I interpreted this premise as being implied because without it, no person would have a reason to take issue with overweight or obese people who consume excessive soft drinks. But many people think it appropriate to pay for the medical expenses of others (via universal health care, or some related, government managed bureaucracy), or otherwise see medical care as a “basic human right” (I recall that this term “right” has been discussed by Paul and Kitty elsewhere. I spent some time searching morelife.org, selfsip.org, and this group, looking for a discussion on this, and didn’t find one).

    The lesson I concluded after thinking about this tax was: when one feels an obligation to pay for the medical expenses of others, one might feel a desire to control the actions of hir beneficiaries, to minimize the expense. Said in another way, when accepting charity from others, one must remember that one is a beneficiary of charity, and that the benefactor is entitled to set the terms of the charity.

    With regard to government “charity”, if government is involved in paying for medical expenses for others, a reasonable government agent, in an effort to balance the budget, will try to minimize expenses. And given that being overweight or obese predisposes one to increased medical expenses, the behaviors of such people will be a target of government modification. As is seen in this proposed soft drink tax. Other examples include tobacco, fuel, and alcohol taxes (which also are, at least partly, intended to modify behavior), as well as a CO2 tax designed to regulate CO2 output of individuals and/or businesses.

    The shocking part to me was that this soft drink tax was even suggested in the first place. In writing this post, I made clear to myself the premises (1-5) upon which this proposed tax was predicated. In seeing them more clearly, it disgusts me that someone would think in this way, i.e. would want to control the actions of others, particularly by taxation.

    Another reason the proposal disturbed me was that I found it saddening that so many individuals are overweight or obese. That is, enough people are overweight or obese that people are seriously discussing the potential effectiveness of such a ridiculous notion as a soft drink tax on reducing medical costs.

    Another harm this tax would cause is to those who do not consume soft drinks in excess by making those infrequent occasions of consumption more expensive to them.

  4. Kellie Glass RD, LD says:

    Taxing “unhealthy” foods/beverages will absolutely NOT solve the obesity crisis in this country. We need, at some point, to hold ourselves accountable for how we lead our own lives. Why not teach people how to incorporate all foods/beverages into an overall healthy lifestyle that includes healthy nutrition, exercise, stress management, and healthy sleep? For more information, visit http://www.thefriedchickendiet.com

  5. Richard Feinman says:

    I recently sent the following to Travis Smith at the USDA (have not heard back yet):
    Dear Dr. Smith
    I read the USDA recommendations on taxing soda which is of concern to me both as a consumer and because I teach nutrition to medical students. Isn’t the assumption of a sugar-sweetened beverage tax that other features of economic control (like supply and demand) would stay the same? Are we assuming that if there were increased demand for diet soda, bottled water and milk, that manufacturers would not raise the price in response to this demand? If they did and that led to across-the-board increase in price of beverages, would this be a satisfactory outcome? Would a total decrease in water and beverage consumption be beneficial?

    What I didn’t ask is that if there is a large revenue and we find out, for some completely unanticipated reason, that the reduction in sugared soft drink consumption works against us (think margarine-trans-fats) will we now cut off this revenue stream? Or, will the USDA come out with a new statement that “moderate evidence shows that there is no data supporting…” That’s the way the guidelines talk. So is there any provision for failure? Indeed, is there a null hypothesis at all?

    Good questions, no?

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