Sales of sugar-sweetened beverages can be reduced by taxes.
About one year ago, Berkeley, California, added a one-cent tax per ounce on certain sugar-sweetened beverages. The tax was added in an attempt to reduce consumption of sugar to protect children and adults from the evils of sugar. The idea that sugar is bad for you is not new. Experts have linked it to everything from diabetes and heart disease to childhood behavioral health diseases such as ADHD. The proof is much less clear on the ties to a disease process, but the fact is that sugar is an empty source of calories and it is likely not good for your to have calories without nutrients. So, what does the research show?
In a prior post, we discussed the results of a study from Mexico that showed that a sugar tax would reduce consumption but did not significantly affect obesity. Another study from that post looked at the 3-month results of the Berkeley tax and found that prices for sodas did rise in Berkeley, California. So what has changed in the data from 3 months to 12 months?
Before we look at the results, let’s look at what exactly this tax taxes and what it does now.
|The key is “sweetened” with sugar or high fructose corn syrup.||Key is artificially or unsweetened.|
The research: The new study looked at sales of taxes beverages and untaxed beverages during the year after the tax was enacted. The new results confirm just what you would suspect. This new study does cement in the fact that a sugar tax will reduce purchases in a local area where the tax occurs. In the Berkeley area, sales of sugar-sweetened beverages that were subject to the tax dropped as the increased cost of the tax was passed onto the purchaser. Approximately 2/3 of the cost of the tax was passed onto consumers. Groceries sales did not appear to be affected by the tax.
Concern on this sugar tax:
- Fruit juice consumption is ignored. Fruit juice provides little benefit to consumers. I would argue that fruit juice is another form of empty calories and we should encourage customers to reduce and limit its consumption.
- The tax punished consumers. The tax is designed to be levied on soft drinks companies and to reduce their sales. Two-thirds of the tax has already been passed to consumers, but I suspect that all of it will be on their plate eventually. Instead, it hurts consumers and likely moves sales to local surrounding counties that do not have a tax. Unfortunately, it will be the public, not soft drinks companies that end up paying the costs of the new tax both directly by buying sodas and indirectly by purchasing gasoline to travel to buy soda elsewhere.
Taxes hit the poor the hardest. The rich will just pay it or travel across county lines to buy the soda. The poor will cut back or just not buy something else such a new shoes for their kids.
- Taxes cost taxpayers through enforcement. The tax man must be paid, and enforcement of these new taxes will require the hiring of more staff to ensure the taxes are paid. All of us must pay to have a new tax.
- Tax is poorly targeted that is hit and miss. For example, they tax bottled coffee that is usually in smaller containers but miss the large frappe you buy at your local coffee house. Also, sweetened cakes and snacks such as donuts, pastries, candy, and ice cream bars are completely ignored. Consumers can also just switch to Kool-Aid packets and sweeten them themselves. You can easily carbonate it soda stream if carbonation is what you want. You need to treat all sources of sugar the same and not pick winners and losers.
The bottom line: I have no doubt that obesity is increased with increased sugar consumption. Prior taxes have failed to deliver on this goal, so I would be shocked if Berkeley can achieve this. I also have no doubt that if you raise the prices on drinks that consumers will purchase less of the product unless it is imposed state or nationwide. The study did not look at disease rates, and it is probably too soon to see an effect, but I suspect if Mexico is any indication, this tax will not have any effect. I suspect that most of the consumers will switch to drinks they sweeten themselves because sugar, itself, is not taxed. They may also turn to baked goods, ice cream, or candy to get their sugar fix.