CommentaryCommentary: Soda taxes, obesity, and the shifty behavior of consumers
Research highlights
► A soda tax will reduce soda consumption and raise revenue. ► But consumers will also shift their spending toward cheaper substitutes. ► There is no guarantee that a soda tax will reduce caloric intake and obesity. ► Thus far, empirical evidence for price-induced reductions in obesity is weak.
Introduction
According to a basic law of economics, placing an excise tax on sugar-sweetened beverages (SSBs) would directly raise their prices, reduce the quantities of SSBs demanded and consumed, and would raise revenue, which is currently in short supply at every level of government. In these pages, Andreyeva et al. (2011) present a new estimate of the effects of a penny-per-ounce SSB tax on consumption of SSBs and tax revenues using national data and estimates of consumer responses from an earlier meta-study (Andreyeva et al., 2010). Their analysis is standard and their basic results are reasonable. But what is the motivation behind taxing SSBs? Another insight from economics is that taxes typically distort behavior and reduce well-being, especially for low-income consumers. Absent some extra justification, tax rates should generally either be zero or low.
Section snippets
Soda taxes, obesity, and shifting demand
The specific rationale for an excise tax on SSBs is that it might lower rates of obesity by reducing caloric intake. Obesity is broadly perceived as a threat to individual health, and the burden of higher medical costs associated with obesity-related illnesses is spread broadly through systems of public and private health insurance (Bhattacharya and Sood, 2007). High excise taxes on cigarettes are motivated in part by the future costs borne by governments of treating smoking-related illnesses.
A wide array of estimates
No randomized controlled trials (RCT) exist in this literature, most studies encounter some difficulties with measuring treatments and outcomes, and each uses different data. The end result is a wide range of study designs and results. Of recent efforts, Andreyeva et al. (2011) is unique in not accounting for consumers' substitution toward cheaper sources of calories and in conducting a calibration exercise with behavioral parameters drawn from an earlier meta-study and quantities drawn from
Challenges
The literature does not speak with one voice on the magnitude or even the sign of the effect ob obesity of SSB taxes. Given that the primary justification for an SSB tax is that it might reduce obesity, it seems clear that more research is needed before adopting such a policy. Governments could raise a lot of revenue simply by taxing everyday activities of any kind. But taxes are fundamentally unwelcome, as evidenced by prevailing political winds and supported by economic theory. Taxes are
Conflict of interest statement
None.
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Cited by (16)
Who drinks soda pop? Economic status and adult consumption of sugar-sweetened beverages
2020, Economics and Human BiologyCitation Excerpt :Given that taxing soda has been the leading policy option pursued, it is not surprising that the majority of research on the effectiveness of policies to reduce SSB consumption focus on them. Studies of the impact of “soda” taxes on consumption that account for possible substitution from SSB to untaxed sugary drinks generally find that SSB demand is elastic (Backholer et al., 2016; Edwards, 2011; Escobar et al., 2013; Powell et al., 2013; Wright et al., 2017). However, they also find that the tax must be substantial (20 % or more) to have much impact on BMI and obesity prevalence.
Sugar-Sweetened Beverage Health Warnings and Purchases: A Randomized Controlled Trial
2019, American Journal of Preventive MedicineCitation Excerpt :By examining a behavioral outcome using a randomized design, studies like the present one can help build an evidence base to inform SSB warning policymaking and potential litigation. The weight loss benefits of reducing SSB consumption depend on the extent to which individuals compensate for decreased SSB consumption by increasing caloric intake from other sources.42,43 This trial provides some insights on compensatory behaviors.
Can evaluative conditioning decrease soft drink consumption?
2016, AppetiteCitation Excerpt :If this were the case, it would not be appropriate to include such images on soda packaging. Additionally, like with proposed soda taxes, pictorial warnings are likely to be resisted by soft drink producers and policy-makers concerned about the images’ impact on sales, personal freedom, or unintended consequences such as the possibility that individuals would increase consumption of other high-calorie beverages (e.g., Edwards, 2011). On the other hand, several countries have introduced requirements for similar pictorial warnings on cigarette packaging in the past 5 years, often despite legal challenges (e.g., Lencucha, Labonte, & Drope, 2015).
Effects of a price increase on purchases of sugar sweetened beverages. Results from a randomized controlled trial
2014, AppetiteCitation Excerpt :However, experimental evidence is limited since it is merely based on small controlled settings (such as cafeterias) and does often give no good insight into substitution effects (Mytton et al., 2012). To our knowledge, there exist neither RCTs studying the effects of an SSB tax in larger settings (such as supermarkets) (Epstein et al., 2012) nor studying the effects on close substitutes such as milk, diet drinks, alcohol or candy (Edwards, 2011). Therefore, the aim of this study was to examine the effects of a 13% price increase on SSBs (to reflect an increase in Dutch value added tax from 6% to 19%) on beverage and snack-food purchases using a randomized controlled design within a three-dimensional web-based supermarket.
Questioning the effectiveness of food taxes as part of the fight against obesity
2014, Gaceta SanitariaSugar-sweetened beverage taxes raise demand for substitutes and could even raise caloric intake
2012, Preventive MedicineCitation Excerpt :What Adam Smith knew well but which bears repeating is that taxes shift demand toward substitutes. My original point about SSB taxes (Edwards, 2011) is that if the ultimate goal is reducing obesity, evidence suggests that taxing SSBs alone may not work, because consumers can and do substitute toward cheaper calories. The major issues in Adam Smith's time reveal this and a subsidiary insight.