Obesity costs. A lot. The tab comes in obvious ways, like increased health care costs, and less obvious ways, like decreased fuel efficiency. And we’re all paying. Looking just at Medicare and Medicaid expenses for obesity-related problems, we’re already north of $60 billion annually. If more taxpayer money is going out, it’s gotta come from somewhere, and one possible somewhere is a soda tax.
Want to figure out whether a soda tax is a good idea? Hold on to your hat. It requires a whirlwind tour through nutrition science, economic policy, human behavior and the government’s role in the lives of its citizens.
Let’s take that last one first. If you have a fundamental objection to government efforts to get people to eat differently through the tax code, there’s nothing else to discuss.
If you’re still with me, let’s talk about soda. Not just soda: sugar-sweetened beverages, a category that encompasses sports drinks, energy drinks, sweetened teas and fruit drinks, including drinks with “fruit juice concentrate,” which is just sugar extracted from fruit.
The first question, the nutritional one, is whether drinkable sugar is implicated in our problem with obesity and related diseases, and pretty much everyone says it is, at least to some extent. Added sugars are a problem in general, but the ones in drinks are particularly problematic because sweetened drinks don’t seem to contribute to feelings of fullness in the same way that sweetened foods do, so it’s that much easier to consume too many calories.
The next question is whether a tax would get people to drink less, and there’s widespread agreement that, at some level, it would. For any tax, on any item, there is a level at which it won’t affect purchasing and a level at which it will. The problem I found is that predictions of consumption drops run pretty high, but if we look at places where such taxes have been enacted, the changes have been small.
The tax rate being bandied about is a penny per ounce, the same amount that voters in Berkeley, Calif., overwhelmingly decided to levy on sugary drinks in balloting last year. Although 33 states tax soda or sugar-sweetened drinks, Barry Popkin, a professor of nutrition at the University of North Carolina at Chapel Hill, says their taxes are too low (they average 5.2 percent of the sales price) to meaningfully affect consumption. Berkeley is the first city to impose a tax and the first U.S. experiment with a tax that’s probably high enough to put a dent in consumers’ soda habits. Depending on the product, a penny-per-ounce tax can be heavy; when Coke goes on sale at my supermarket, I can buy 24 cans — 288 ounces — for about $4. A $2.88 tax would mean a 72 percent price increase. For higher-priced energy and fruit drinks, the percentage increase would be smaller. According to Lisa Powell, a professor of health policy and administration at the University of Illinois at Chicago, a penny-per-ounce tax would be about equal to a 17 percent price increase overall. She says that would result in about a 20 percent consumption decline. Another study says 15 percent. Another says 24 percent.
Conveniently for those of us trying to predict this kind of thing, Mexico enacted a soda tax at the beginning of 2014. Although one study of results from early 2014 shows soda sales down about 10 percent, data from the whole year show only a 2 percent drop (per capita) from the year before. Even then, it’s hard to say what role the tax played because, since 2000, there have been years when sales in Mexico have gone up and years when they’ve gone down.
Several European countries also tax sugary drinks, but, as with Mexico, it’s tough to tease out whether, or how much, the taxes affect consumption. Marc Bellemare, assistant professor in the department of applied economics at the University of Minnesota, took a close look at soda sales data (from Euromonitor International, which tracks sales of an astonishing array of food items around the world). He concluded that, depending on how you parse the data, you could claim anything from no impact to about a 2.6 percent decrease.
“In academic parlance, the results are not ‘robust,’ ” Bellemare says. (There’s one more interesting point from the European data: Denmark abolished its tax in 2013, and 2014 soda sales were 12 percent higher than in 2012, the last full year the tax was in effect.)
Every country is different and every tax is different, and so taxes’ predictive power for us, here, is limited. After talking to a lot of economists and public health experts, I think it’s reasonable to expect a penny-per-ounce tax on sugary drinks to reduce consumption at least a little. But there’s a larger question: Will we see health benefits from that reduced consumption? That’s a much stickier wicket, because it requires that we predict how consumers who reduce their intake will spend the money they save.
The most compelling argument that decreasing soda consumption won’t improve health is that it hasn’t. In the United States, consumption has been dropping since 2000; obesity, though, has held steady. Diabetes levels, meanwhile, increased until 2010 and leveled off in 2011, according to the most recent data. If sugar-sweetened beverages, sometimes called SSBs, are implicated in obesity and its related diseases, how can that be?
Chris Gindlesperger, spokesman for the American Beverage Association, calls the disconnect between soda consumption and diabetes “an inconvenient truth,” but scientists who study the connection don’t sound inconvenienced.Popkin of UNC says that “the people getting diabetes are people who consume very high levels of SSBs and have only slightly reduced these very high levels of their soda consumption.” And Frank Hu, a professor of nutrition and epidemiology at Harvard’s School of Public Health, says that “it is not clear whether the decline in SSB consumption actually contributes to the plateau of the [diabetes] epidemic, because Type 2 diabetes is a multi-factorial disease.”
The lack of a clear correlation doesn’t mean sugary drinks aren’t implicated in obesity and disease. But it does mean the relationship is complicated. Two reviews of the evidence for a connection between taxation and obesity, both done in 2013, concluded that “the effectiveness of a taxation policy to curb obesity is doubtful” and that “taxing SSBs may reduce obesity.” As Bellemare says, the results are not robust. We cannot be sure, not by a long shot, that a tax on soda will result in improved public health.
But wait. Maybe there’s a better tax. One of the beverage industry’s objections to an SSB tax is that it’s unfair to single out sugary drinks. Even if they’re worse than other products with added sugars, giving those other products a free pass does seem inequitable, and it’s true that one reason lawmakers focus on sugary drinks is that they’re easy to define and tax. It’s much harder to tax everything with added sugar, commensurate with its sugar content.
Unless you tax it in the supply chain rather than at retail. If we tax sugar, high-fructose corn syrup, fruit juice concentrate and other added sugars at the point where they’re manufactured or imported (we already do tax imported sugar), we essentially tax everything with added sugar, commensurate with its sugar content (with the exception of foods already manufactured before we import them). An “input tax,” it’s called.
Helen Jensen, a professor of economics at Iowa State University, says an input tax is a better way, in part because “an economist wants to place the tax as close to what you want to reduce as possible.”
Adopting that approach, though, might be an uphill battle. None of the economists I spoke with knew of a food ingredient taxed that way (although gasoline is), and Jensen speculated that manufacturers might object to a brand-new way to tax them even more than they object to a soda tax. But an input tax has a big advantage over a soda tax in that it gives us two shots at a health benefit. Instead of counting solely on consumers to improve habits, we could count on food manufacturers to reformulate products to use less of the taxed ingredient.
Product reformulation, says Sean Cash, associate professor at Tufts University’s Friedman School of Nutrition Science and Policy, is the better public health bet. Although consumers might not pay attention to small price increases, at large food companies, “dozens of people are paying a lot of attention. If we could achieve a 5 percent reduction by reformulation, that would swamp what we can achieve with consumer-level intervention.” Consumer change would be the icing on that reformulated cake.
Ultimately, though, the public health benefits of any kind of sugar tax are uncertain. I think we’d be likely to see a small improvement, but we have to acknowledge that, worst case, with no benefits at all, the proposition we’re left with is a source of revenue to help offset the expenses of obesity, collected from the people eating or drinking products that contribute to obesity. The beverage industry’s Gindlesperger calls that a “money grab,” a perfectly appropriate name for a tax you don’t like.
He’s right that there are ways in which it’s not fair, but if perfect fairness is our taxation standard, woe betide the Treasury. If the choice is do this or do nothing, I choose this.