Pros and Cons of Taxing Sweetened Beverages Based on Sugar ...

STATE AND LOCAL FINANCE INITIATIVE

RESEARCH REPORT

The Pros and Cons of Taxing

Sweetened Beverages Based on Sugar

Content

Norton Francis December 2016

Donald Marron

Kim Rueben

ABOUT THE URBAN INSTITUTE The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector.

Copyright ? December 2016. Urban Institute. Permission is granted for reproduction of this file, with attribution to the Urban Institute. Cover image by Tim Meko.

Contents

Acknowledgments

v

Executive Summary

vi

The Pros and Cons of Taxing Sweetened Beverages Based on Sugar Content

1

Taxing Sugar Content Is the Least Costly Way to Reduce Sugar Consumption

3

Sugar Content

3

Previous Studies

4

Modeling Different Tax Approaches

4

Distributional Considerations

6

Business Responses and Reformulation

6

Taxing Based on Sugar Content Is Feasible at the National Level

7

Taxing Based on Sugar Content Raises More Issues at the State and Local Level but Is Generally

Feasible As Well

8

Collection Points

8

Legal Authority

9

Cross-Border Coordination

11

Experience with Taxes Based on Content or Categories

12

Conclusion

13

Appendix A. Modeling Policy Trade-Offs in Designing Sweetened-Beverage Taxes

15

Model

15

Strategy

15

Consumer Demand

16

Soft Drink Volumes, Prices, and Sugar Content

16

Pass-Through

17

Outcomes of Interest

17

Tax Designs

18

Results

19

Taxes That Raise the Same Revenue

19

Taxes That Achieve the Same Reduction in Sugar

21

Discussion and Limitations

22

Notes

24

References

26

About the Authors

28

Statement of Independence

30

IV

CONTENTS

Acknowledgments

This report was funded by the American Heart Association with additional funds from other general support funders of the State and Local Finance Initiative. We are grateful to them and to all our funders, who make it possible for Urban to advance its mission.

The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Funders do not determine research findings or the insights and recommendations of Urban experts. Further information on the Urban Institute's funding principles is available at support.

We thank Maeve Gearing and John Iselin for contributing to our research, Michael Marazzi for editing, Ann Cleven and Sarah Gault for formatting, and Frank Chaloupka, Carter Headrick, Rachel Johnson, Martin O'Flaherty, Barry Popkin, Mark Schoeberl, Jonathan Pearson Stuttard, and Laurie Whitsel for comments on earlier drafts.

ACKNOWLEDGMENTS

V

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