Wednesday, July 07, 2010

USDA/ERS study estimates obesity-reducing effects of a soda tax

A 20% soda tax would reduce daily food energy intake for adults by 37 calories, enough to reduce the prevalence of obesity by almost 10%, according to a new report this week from USDA's Economic Research Service (ERS).  The prevalence of obesity for adults could fall from 33.4% to 30.4%, the report estimates.  The report corroborates other recent research suggesting that the obesity prevention impact of taxes on sugar sweetened beverages could be substantial.

There are a couple reasons why the estimated impact is higher than one might have expected based on previous research.  First, the report, by ERS researchers Travis Smith, Biing-Hwan Lin, and Jong-Yin Lee, estimated a somewhat stronger consumer response to beverage price changes than previous research used.  The new estimated own-price elasticity of -1.26 means that a 10% increase in price leads to about a 12.6% reduction in consumption.  Second, even a fairly small change in average daily soda consumption accumulates over time, leading to a notable estimated change in weight for a year's time.

Purely paternalistic taxes motivated by public health tend to generate political push-back, especially from more conservative policy-makers, but also from consumers who resist having their choices directed by public policy.  I think such taxes may be easier to explain to people when the tax revenues are needed in any case, to provide essential government services.  The idea is: "Paying for teachers and police requires some revenue source.  A tax on soda makes as much sense as a tax on other more meritorious goods, especially if people don't want their income or property taxes raised either."  The health benefits could be mentioned in passing as an additional advantage.  In this spirit, the Rudd Center at Yale has recently posted an online revenue calculator for beverage tax proposals.

The growing interest in beverage taxes during tough fiscal times is putting stress on beverage manufacturers.  The American Beverage Association in June pointed to earlier estimates, contradicted by the new USDA report, showing "a 20 percent tax on a soft drink would decrease Body Mass Index (BMI) for an obese person by just 0.02, an amount not even measurable on a bathroom scale."  The association's press release is headlined, "Reducing soda consumption is a simplistic and ineffective solution to public health challenges."

7 comments:

Chris K. said...

I think we should tax full-calorie sodas to encourage people to switch to diet or other healthier alternatives.

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Florida said...

Obesity is a huge problem for the poor nutrition that people do every day, this must be methodically already observed that different organs may complicate and make the heart problermas therefore always careful attention to what you eat.

Amelia said...

I don't understand who, besides industry lobbyists, would be against a soda tax. Sounds like an ideal way to kill 2 birds with one stone.

That being said, I think we also need to increase access to high quality beverages (like organic milk and clean, good-tasting tap water in all regions of the country) so that people have the ability to make better beverages choices.

chinwe said...

what if you taxed the sugar content instead of the soda? so, any beverage with xx g of sugar and xxx calories per serving will be taxed 20%. if the objective is to promote health, provide soda companies to make soda healthier instead of demonizing the beverage

Caitlin said...

Wouldn't the tax revenues be better served supporting obesity prevention and nutrition education programs? Surveys in NY state have found that the public is much more supportive of a tax on soda when the revenues raised go towards health related programs. With the beverage industry lobbying as hard as they've been on this issue, rallying public support behind the tax would be critical. Putting the tax revenues towards health programs, especially those targeted to low income groups, would also counter-act the beverage industry's arguments that the poor will be hit the hardest by such a tax.

I think a soda tax is a fantastic policy, but I think many people in the country would be doubly outraged by the tax if the revenues just went to support general government needs.