CanTaxesonCaloricallySweetened-FarmDoc.docVIP

3rd Quarter 2010 | 25(3) Can Taxes on Calorically Sweetened Beverages Reduce Obesity? Jessica E. Todd and Chen Zhen JEL Classifications: D12, H2, I18 Enlightened by the success of using tobacco taxes to curb smoking prevalence, many have argued that large beverage taxes are an attractive policy tool in the fight against obesity because, unlike many other foods, calorically sweetened beverages (CSBs) have little nutritional value. However, unlike tobacco which is harmful at any level of consumption, CSBs may be consumed in moderation as part of a healthy diet. In the United States on average, CSBs make up a large share of total daily calories—about 13% for adolescents and young adults (Figure 1). Thus, reducing the consumption of CSBs may substantially reduce caloric intake, as long as individuals do not compensate by adding calories from other foods or drinks. Existing studies of beverage demand establish that, consistent with economic theory, households do reduce the quantity of CSBs purchased in response to higher prices (Andreyeva, Long, and Brownell, 2010; Smith, Lin, and Lee, 2010; Finkelstein et al. forthcoming), which suggests that a tax-induced large increase in shelf price may be effective at reducing caloric intake. The question is how large of a tax—and in what form—is needed to cause a noticeable decline in the prevalence of overweight and obesity? An emerging body of economic research has attempted to address this question. Much previous research has referred to beverages sweetened with sugar or corn syrup as sugar-sweetened beverages. We refer to these drinks as CSBs to more accurately reflect the fact that not all contain sugar. Although some claim that a 10% tax on CSBs would likely “…be the single most effective measure to reverse the obesity epidemic” (Frieden, Dietz, and Collins, 2010, p.358, ), a closer look at current consumption patterns and prices suggests that getting Americans to exchange CSBs for healthier low-calorie beverages or to re