Sugar Tax Benefits Governmental Revenue, Not Necessarily Our Health

The researchers performed a literature search across eight bibliographic directories identifying 39,000+ titles and abstracts of interest, narrowed to 400 articles that were read, and 86 that formed the basis of their meta-analysis. Forty-four studies looked at national taxes, 38% focusing on Mexico. Forty-two articles considered more local taxes, 30% from Philadelphia and 28% from Berkeley. From a global perspective, the early sites of SSB taxation, Mexico, Philadelphia, and Berkeley, are oversampled.

More to the point

• 56% of the studies looked at SSB prices
• 50% looked at SSB sales
• 38% looked at drinks substituted for SSBs
• 17% looked at unintended consequences of these taxes, i.e., traveling to tax-free stores to purchase SSBs
• 5% looked at BMI, 2% looked at dietary intake

Based on these sources, the strength of this current meta-analysis lies in the impact of SSB on revenue and sales; we continue to know very little about the effects of these taxes on improving our health.

An economic moment

It is an axiomatic belief in economics that higher prices reduce demand. Perhaps in this time of significant inflation, you have noted that you have cut back on some purchases. Of course, there are other purchases that you cannot reduce, for example, the cost of transportation to work, whether it be in your car or on public transit. The economic term to describe what purchases we continue to make as the price of goods rises is “price elasticity.” The impact of price elasticity is reflected in its numerical value; in general, absolute values greater than one are felt to reflect elasticity. SSB are price elastic, declining consumption with rising prices; transportation costs to work are not.

Back to the meta-analysis results

Taxes on SSBs resulted in

• Higher prices for SSBs, with a wide range of increases dependent upon the rate of taxation
• Retailers passed 82% of the new taxes on to consumers, reducing their marginal revenue by 18%
• SSBs were price elastic; taxation significantly reduced sales by 15% [1]
• In the US studies, there was an increase in cross-border shopping, driving a little further to buy untaxed SSBs.
• There were no changes in employment in the SSB-related manufacture or sales.
• Tiered taxes, meaning increasing taxation based on increasing sugar content, prompted manufacturers' reformulation.

• BMI, assessed only in the US, identified weight loss in only 1 of 5 studies; the others showed no association
• In the two studies of changes in caloric intake, one showed SSB taxation having no impact; the other showed an increase in calories.

“No evidence was available yet for BMI and dietary outcomes based on recent excise taxes in either the US or globally.”

Unsurprisingly, we have no evidence of a positive effect on our health. This is partly because the studies are, in the words of the researchers, “low quality.” More importantly, the impact on our health may take some time to be seen. But certainly, we should see a reduction in BMI or caloric intake if this is the desired marker of success. And this doesn’t even consider whether BMI or caloric intake is a valid marker of “better” health.

We can say with greater certainty that increasing the price for SSBs reduces their consumption and, in the case of tiered taxes, prompts manufacturers to create a less expensive product because the tax upon it is lower. Our belief that this will improve our health remains unproven. The researchers end with a telling comment that I believe reflects their underlying belief that the health benefits are really there.

“Prior studies on BMI and SSB taxes were limited to research on low state sales taxes, which are unlikely to adequately represent potential changes in BMI outcomes of recent excise SSB taxes.” [emphasis added]

There it is, faith in a policy that has yet to show any impact on our health. It is not that the policy does not work; it is because the tax was too low. Raise them high enough and become a form of economic prohibition, another source of economic inequality. Or we might consider them a sin tax, improving our tax revenue with no discernable improvement in our health.

[1] For comparison, SSBs had an absolute price elasticity of 1.5, cigarettes at 0.87, and alcohol at 0.4 are far more inelastic; raising their price has little impact on consumption. Perhaps that is a sign of addiction?

Source: Outcomes Following Taxation of Sugar-Sweetened Beverages A Systematic Review and Meta-analysis JAMA Network Open DOI:10.1001/jamanetworkopen.2022.15276