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Cost-Effectiveness of a Sugar-Sweetened Beverage Excise Tax in the U.S.

Implementing a national sugar-sweetened beverage excise tax could substantially reduce body mass index (BMI) and health care expenditures over 10 years, and increase healthy life expectancy in the US.

Long MW, Gortmaker SL, Ward ZJ, Resch SC, Moodie ML, Sacks G, Swinburn BA, Carter RC, Claire Wang Y. Cost Effectiveness of a Sugar-Sweetened Beverage Excise Tax in the U.S. Am J Prev Med. 2015 Jul;49(1):112-23. doi: 10.1016/j.amepre.2015.03.004.

The close link between consumption of sugar-sweetened beverages (SSB) and excess weight gain, diabetes, and cardiovascular disease has led to public health recommendations for higher taxes on unhealthy drinks like soda and sports drinks. While a number of studies have found that higher beverage taxes and prices are associated with significantly lower BMI, this is the first study to estimate the cost effectiveness of implementing a $0.01 per ounce SSB excise tax in the US.

By using a simulation model, the study found that implementing the tax nationally would cost $51 million in the first year and would reduce SSB consumption by 20%, substantially reducing BMI among both youth and adults. Over a 10-year period, the tax would avert 101,000 disability-adjusted life years, gain 871,000 quality-adjusted life years, and result in $23.6 billion in healthcare cost savings. Annually, the tax would generate revenue totaling $12.5 billion.

Rows of soda bottles“We know that the current level of sugar-sweetened beverage consumption in the United States is doing real harm to our children, our families, and our society by increasing the risk of obesity, diabetes, and cardiovascular disease, leading to increased healthcare costs and early deaths,” says lead study author Michael Long, ScD, a postdoctoral research fellow at the Harvard Prevention Research Center. “The question is: what are we going to do about it? Our study shows that a small tax on the production of these beverages can prevent obesity, save lives, and reduce healthcare costs for the country. This is a low-cost prevention strategy that could also raise revenue to fund community programs to promote healthy eating and physical activity.”

In contrast to sales taxes that are collected from the consumer at time of purchase, this per-volume excise tax would apply to producers and distributors of sugar-sweetened beverages and would be incorporated into shelf prices, leading to an estimated 16% total price increase for sodas, sports drinks, fruit drinks, and any other beverages with added caloric sweeteners.

Implementing an excise tax on sugar-sweetened beverages could serve as a powerful social signal to reduce sugar consumption through additional individual behavioral and policy changes. In the ongoing debate over policy approaches to curb the obesity epidemic in the US, this analysis provides important new information to policymakers and the public regarding the substantial savings in both human health and government expenditures that could be achieved.