The Effects of Taxing Sugar‐sweetened Beverages Across Different Income Groups

Abstract

Taxes on sugar sweetened beverages (SSBs) -so called 'soda taxes' are currently receiving considerable attention as a potentially very effective policy intervention in the fight against rising obesity rates all-over the world. By increasing the price of sugar sweetened beverages, taxes promise to reduce sugar intake and subsequently bodyweight of individuals. However, there are concerns that such taxes are regressive, i.e. burden lower income groups more. This paper explores this issue by estimating the impact of SSB taxes on consumption, bodyweight and tax burden for low, middle, and high-income groups using an Almost Ideal Demand System and 2011 Household level panel data. A significant contribution of our paper is that we compare two types of SSB taxes recently advocated by policy makers: A 20% flat rate sales (valoric) tax, and a 20 cent per litre volumetric tax. Censored demand (which arises when households do not consume certain beverages at all) is accounted for using a two-step procedure. We find that the volumetric tax would result in a greater yearly per capita weight loss than the valoric tax (0.9kg vs 0.4 kg). The difference between the change in weight is substantial for the target group of heavy purchasers of SSBs in low-income households, with a weight reduction of 4.4 kg for the volumetric, and 2.3 kg for the valoric tax. The average per capita tax burden on low-income households is $17.90 per capita per year (0.21% of income) compared to $15.20 for high-income households (0.064% of income) for the valoric tax, and $13.80 (0.15%) and $10.10 (0.04%) for the volumetric tax. In summary, the tax burden is lower and weight reduction is considerably higher under a volumetric tax. These findings have significant policy implications for obesity reduction strategies.

Benefits of Fiscal Policies on Sugar-Sweetened Beverages

“…Furthermore, research has shown that even a minimal reduction in BMI has the potential power to change an individual's weight status from obesity to overweight and from overweight to normal weight [64,65].…”

“…The authors also found that the burden of this SSB tax would be higher among low-income households ($17.87 AUD, 0.21% of annual income) compared with high-income households ($15.17 AUD, 0.07% of annual income) [64]. Lin et al reported similar results for the USA: a heavier tax burden for low-income households ($19.97 USD, 1.0% of food expenditures) compared with high-income households ($18.84 USD, 0.6% of food expenditure) [49].…”

“…In Germany, there was no country specific ownor cross-PE, thus the authors used PEs of -0.9 to -1.2 from a previously published article [68]. In Australia, own-and cross-PE was estimated using the Almost Ideal Demand System (AIDS) as -0.63 [64,65]. In Canada, a PE of -1.3 from a meta-analysis by Cabrera Escobar et al was used [54].…”

Estimating the effects of a calorie-based sugar-sweetened beverage tax on weight and obesity in New York City adults using dynamic loss models

“…Previous simulations using econometrically estimated price elasticity of SSB demand showed that expected calorie reductions from a 20% targeted tax on SSBs, assumed to fully pass on to retail prices, may significantly reduce weight, obesity prevalence, and diabetes incidence [28,31,32]. However, quasi-experimental studies show that current soda taxes do not influence overall calorie intake and are ineffective in reducing population weight, but they may have larger effects in specific high-risk populations [33e36].…”

The impact on productivity of a hypothetical tax on sugar-sweetened beverages

“…The estimated change in BMI Haby MM et al (34) and Sharma A et al (33) Mean, SE Lognormal By age and sex…”