Taxing the grams of sugar in sugar-sweetened beverages rather than the volume of liquid they contain could substantially boost the overall health benefits and economic gains of the corrective tax by nearly 30%, according to a Policy Forum published in the September 6 issue of Science. If implemented globally, this relatively simple shift in sugary drink taxation could help people around the world lose as much as 150 million extra pounds combined.
Corrective taxes are commonly used as a tool to reduce or mitigate negative behaviors by levying a tax on products or activities known to cause harm, such as smoking or air pollution.
These types of taxes applied to the sale of sugar-sweetened beverages are becoming more commonplace as an effort to help reduce obesity, diabetes and other health issues associated with consuming sugary drinks such as sodas and energy drinks. To date, seven U.S. cities and more than 30 countries have implemented corrective tax policies on the sale of sugar-sweetened beverages.
To be most effective, corrective tax policies should be designed to levy taxes that are proportional to the harm that could be caused — a basic principle in the economics of corrective taxation, according to the authors of the Policy Forum. For example, previous studies show that taxes on cigarettes are most successful when they scale with the health impacts of the chemicals they contain.
"Many studies show that policies that fail to follow this principle fall well short of their potential," write Anna Grummon, the study's lead author and researcher at the University of North Carolina Gillings School of Public Health and her colleagues.
The two most well-known consequences of drinking sugary beverages are weight gain and the development of type 2 diabetes, both of which are tied directly to a drink's sugar content. Unlike other corrective tax policies, which focus on a harmful substance, most sugar-sweetened beverage taxes worldwide are based on the size of the drink, regardless of the amount of sugar it contains.
According to the researchers, the current volumetric approach to sugar-sweetened beverage taxes is poorly targeted to its potential for health impacts. Because all sugar-sweetened beverages are taxed at the same rate, there is little incentive for consumers to switch from higher-sugar drinks to lower-sugar alternatives, they note.
"While volumetric taxes reduce consumption of [sugar-sweetened beverages] in general, they do not maximize a tax's possible health benefits," the authors write.
Grummon and her colleagues demonstrate that a shift in sugar-sweetened taxation from volume to sugar content would be more effective at reducing the negative health impacts of sugary beverages for consumers relative to the current volumetric tax.
Based on the authors' calculations, the current volumetric policy causes a 24% reduction in sugar intake from sweetened beverages, or nine grams of sugar per day, in the average American adult. Refocusing the tax on sugar content could increase this amount by an additional 2.5 grams, translating into three pounds of weight loss, a 4.4% drop in obesity prevalence and a reduction of type 2 diabetes incidence by 17 cases per 100,000 people over ten years.
What's more, the additional economic gains of a sugar tax would increase by about $1.70 per person per year over current policy — from roughly $6.00 to $7.70 per person per year, equating to an additional $500 million in annual economic efficiency gains.
Across the board, the health effects and overall economic gains of a sugar-based tax would generate nearly 30% more benefits than a volumetric tax, they conclude.
"These benefits are remarkable given that they come from straightforward changes in tax design," the researchers write.
Because a tax on a beverage's sugar content would require implementation decisions similar those for a volumetric tax, the researchers suggest that a change in corrective tax strategy is highly feasible. For instance, taxes could be collected based on the grams of sugar in a drink instead of the number of ounces — information readily available on each product's nutrition facts label.
"Once there is agreement to tax sugar-sweetened beverages, it seems hard to argue against designing the tax to target the drinks that harm public health the most," write Grummon and the researchers.