Soda taxes – would they do any good?

By Dr. Ananya Mandal, MDDec 13 2010

According to new research from Duke-National University of Singapore (NUS) Graduate Medical School imposing higher taxes on sodas and other sweetened drinks would lead to only minimal weight loss among most people and would have no effect on weight among consumers in the highest and lowest income groups.

The study was led by Eric Finkelstein associate professor of health services at Duke-NUS who looked at differential impact on calories and weight of a 20 percent and 40 percent tax on sodas and other sweetened beverages among different income groups. The study was published in the Archives of Internal Medicine. Earlier studies have shown that excess consumption of sugary drinks leads to weight gain and contributes to the epidemic of obesity in the U.S.

For this study the team obtained information in a database of U.S. households that tracked their store-bought food and beverage purchases over the course of a year. This included the size of the household, demographics and the cost and quantities of foods and beverages purchased by brand and UPC code. Drinks brought included carbonated and non-carbonated drinks, including sodas, diet carbonated beverages, sports/energy drinks, fruit drinks, fruit juice and skim and whole milk.

Finkelstein said, “If consumers switch from Coke to Diet Coke or water there would be no offsetting gains… If they switch to other high calorie drinks, the effects of the tax would be diluted.” They estimate that if the prices of these sugared drinks were raised by 20 percent, this would generate about $1.5 billion per year in tax revenue in the U.S.; a tax that raised prices by 40 percent would generate $2.5 billion per year, at a cost to the average household of about $28.

Co-author Chen Zhen a research economist at RTI International added that taxes are regressive in the sense that the tax paid as a percentage of household income is greater for lower income households than for higher income households. He added, “However, because poor households purchase far more generic brands that are significantly cheaper, they pay a smaller share of the total tax revenue.”

Results show that because of switching from sugared sodas to other beverages, the effect on total calories and weight is relatively small. A tax that raises prices by 20 percent generates a daily average reduction of 6.9 calories. Over the course of a year, this equates to no more than 0.7 pounds per household member. A 40 percent tax would reduce daily calories by 12.5 calories and generate annual weight losses of up to 1.3 pounds per person per year. Finkelstein said, “Although small, given the rising trend in obesity rates, especially among youth, any strategy that shows even modest weight loss should be considered… Extending the tax to restaurants and vending machines would generate more tax revenue and perhaps greater weight losses.” Most of the weight losses were generated from middle income groups. “Higher income groups can afford to pay the tax so they are unaffected, and lower income groups likely avoid the effects of the tax by purchasing generic versions, waiting for sales, buying in bulk, or by other cost-saving strategies,” Finkelstein said.

According to the Center for Disease Control and Prevention (CDC), two-thirds of the U.S. population is overweight or obese and obesity costs the U.S. an estimated $147 billion per year. Obesity is a major risk factor for type 2 diabetes, cardiovascular disease, and some types of cancer.

Dr. Kelly Brownell, director of the Rudd Center for Food Policy and Obesity at Yale University added that such studies can only simulate how people might react to soda taxes. “The fact is that nobody has been able to see how people will really respond under these conditions.”