Resource Type: Research Briefs & Reports

The information in this brief is intended for educational use only.

This brief provides a summary of the CHOICES Learning Collaborative Partnership simulation model of a $0.02-per-ounce state excise tax on sugar-sweetened beverages (SSB). The tax, which would be administered by the Washington State Department of Revenue (DOR), aims to reduce consumption of calorie-dense, nutrient-poor beverages.

The Issue

Although SSB consumption has declined in recent years, children and adults in the United States consume twice as many calories from SSBs compared to 30 years ago.^{1 – 3} Research has linked SSB consumption to excess weight gain, diabetes, and cardiovascular disease. SSB consumption may increase the risk of developing chronic diseases via effects on body mass index (BMI) and other mechanisms.^4-5 The Dietary Guidelines for Americans, 2015,6 recommends reduced SSB intake to help manage body weight. Drawing upon the success of tobacco taxation and decades of economic research, public health experts have called for higher taxes on unhealthy foods and beverages.^7-10 In 2009, the Institute of Medicine recommended that local governments implement tax strategies to reduce consumption of “calorie-dense, nutrient-poor foods,” emphasizing SSBs as an appropriate target for taxation.¹¹

About the SSB Tax

In this model, the state excise tax would apply to bottlers and distributors and be passed on directly to consumers in full as part of the price of the product. The tax would apply to all beverages with added caloric sweeteners but not to 100 percent juices, milk products, or artificially sweetened beverages. The $0.02-per-ounce excise tax would increase SSB prices in the state of Washington by 24.4 percent. Implementation would require the state DOR to communicate the tax to bottlers and process tax statements; it would require businesses to prepare tax statements for state audits using private tax accountants.

Comparing Costs and Outcomes

CHOICES cost-effectiveness analysis compared the costs and outcomes of the SSB excise tax over 10 years with costs and outcomes associated with not implementing the tax.

Implementing a state $0.02-per-ounce sweetened beverage tax in Washington is an investment in the future. By the end of 2025:

Conclusions and Implications

According to this model analysis, a $0.02-per-ounce sweetened beverage tax on SSBs in Washington would reach all residents of the state and prevent 8,380 cases of childhood obesity and 43,300 cases of adult obesity in 2025. The tax would also prevent deaths while reducing future health care costs. Lower tax rates such as $0.01 or $0.005 per ounce would have less of an impact on health and health care cost savings.

In other locations that have looked at this issue, there are concerns about the impact of the tax on low-income households. This analysis indicates that households will spend less on SSBs after the tax takes effect, therefore increasing income for other purchases. In addition, greater health benefits will accrue to low-income consumers, who on average consume more SSBs than higher-income consumers. The same is true for certain racial and ethnic groups. Thus, disparities in obesity outcomes should decline following implementation of the proposed tax. In addition, revenue from the SSB tax could be reinvested in low-income communities.

References

1. Wang YC, Bleich SN, and Gortmaker SL. Increasing caloric contribution from sugar-sweetened beverages and 100% fruit juices among US children and adolescents, 1988–2004. Pediatrics. 2008;121(6):e1604-e1614.
2. Nielsen SJ and Popkin BM. Changes in beverage intake between 1977 and 2001. Am J Prev Med. 2004; 27(3):205-210.
3. Bleich, SN, Wang YC, Wang Y, Gortmaker, SL. Increasing consumption of sugar-sweetened beverages among US adults: 1988–1994 to 1999—2004. Am J Clin Nutr. 2008; 26883
4. Malik VS, Pan A, Willett WC, Hu FB. Sugar-sweetened beverages and weight gain in children and adults: a systematic review and meta-analysis. Am J Clin Nutr. 2013;98(4):1084-1102.
5. Chen L, Caballero B, Mitchel DC, Loria C, et al. Reducing consumption of sugar-sweetened beverages is associated with reduced blood pressure a prospective study among United States adults. Circulation. 2010;121(22):2398-2406
6. U.S. Department of Health and Human Services and U.S. Department of Agriculture. 2015 – 2020 Dietary Guidelines for Americans. 8th Edition. December 2015. Available at http://health.gov/dietaryguidelines/2015/guidelines/.
7. Chaloupka FJ, Powell LM, Chriqui JF. Sugar-sweetened beverage taxes and public health: A Research Brief. Minneapolis, MN: Robert Wood Johnson Foundation, Healthy Eating Research, 2009.
8. Brownell KD, Farley T, Willett WV, et al. The public health and economic benefits of taxing sugar-sweetened beverages. New Engl J Med. 2009;361(16):1599-1605.
9. 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.
10. Gortmaker SL, Wang YC, Long MW, Giles CM, Ward ZJ, Barrett JL, Kenney EL, Sonneville KR, Afzal AS, Resch SC, Cradock AL. Three Interventions That Reduce Childhood Obesity Are Projected To Save More Than They Cost To Implement. Health Aff (Millwood). 2015 Nov 1;34(11):1932-9.
11. Institute of Medicine. Local Government Actions to Prevent Childhood Obesity, 2009. National Academies Press: Washington, DC.

The design for this brief and its graphics were developed by Molly Garrone, MA and partners at Burness.

This issue brief was developed at the Harvard T.H. Chan School of Public Health in collaboration with the Washington State Department of Health through participation in the Childhood Obesity Intervention Cost-Effectiveness Study (CHOICES) Learning Collaborative Partnership. This brief is intended for educational use only. Funded by The JPB Foundation. Results are those of the authors and not the funders. For more information, please visit: http://www.doh.wa.gov/CommunityandEnvironment/HealthiestNextGeneration/CHOICES

← Back to Resources

UPDATE: On June 5, 2017, the Seattle City Council approved a new tax on soda and other sugary beverages (excluding diet drinks) of 1.75 cents per ounce as way to raise millions for healthy food and education programs. The measure passed on a 7-1 vote. The updated brief is below.

The information in this brief is intended to provide educational information on the cost-effectiveness of SSB taxes.

Intervention Strategy Description

Implementation of a city excise tax of $0.0175/ounce of sugar‐sweetened beverages (SSBs), administered by the city department of revenue and based on proposals considered by federal, state, and local governments.^1‐4

Background 

SSBs include all beverages with added caloric sweeteners. The modeled excise tax does not apply to 100% juice, milk products, or artificially‐sweetened beverages. Although SSB consumption has declined in recent years, children and adults in the U.S. consume twice as many calories from SSBs compared to 30 years ago.^5‐7 Randomized trials and longitudinal studies have linked SSB consumption to excess weight gain, diabetes, and cardiovascular disease. Consumption of SSBs increases the risk of chronic diseases through its impact on BMI and other mechanisms.^8,9 The Dietary Guidelines for Americans, 2015¹⁰ recommends that individuals reduce SSB intake in order to manage their body weight. Drawing on the success of tobacco taxation and decades of economic research, public health experts have called for higher taxes on SSBs and documented their likely impact.^11‐14 In 2009, the IOM recommended that local governments implement tax strategies to reduce consumption of “caloriedense, nutrient‐poor foods,” emphasizing SSBs as an apt target for taxation.¹⁵

Modeling Framework

Increased city excise tax linked to change in BMI through change in SSB price and consumption.

Impact of Tax on Price to Consumers

We assume 100% pass through of the tax over the ten years. Empirical studies in Mexico and France indicate that approximately the full amount of the excise tax is passed on to consumers. ¹⁶ Short term studies for the local tax in Berkeley indicate less than complete pass‐through.^3,17,18 The expected percent increase in SSB price was estimated based on the average $0.059/ounce reported in a review of beverage demand elasticity (inflated to $0.0612 in 2014 dollars).¹⁹ The price per ounce in this study was based on a weighted average across stores, restaurants and other sources proportional to the source of consumed SSBs in NHANES 2009‐2010. The price per ounce of SSBs purchased in stores was calculated using weighted averages of two‐liter bottles, 12‐can cases, and single‐serve bottles or cans based on the distribution of package sizes estimated from 2010 Nielsen Homescan data. The $0.0175/ounce excise tax would result in a 21.5% price increase. We assumed that the tax rate would be adjusted annually for inflation to maintain the 21.5% price increase throughout the ten‐year modeling time frame.

SSB Consumption and Price Elasticity of Demand

We used regionally‐adjusted estimates of total SSB consumption in 2015 published in the UCONN Rudd Center Revenue Calculator for Sugar‐Sweetened Beverage Taxes to adjust national age, sex, and race/ethnicity‐specific consumption data from NHANES 2005‐2010 to estimate current SSB consumption levels in Seattle, WA.²⁰ Powell et al reviewed studies published 2007‐2012 and estimated a mean own‐price elasticity of demand for SSBs weighted by SSB category consumption shares of ‐1.21, ranging from ‐3.87 to ‐0.69. ²¹ Recent research concerning the Berkeley tax indicates a 21% reduction in SSB intake among low income populations. ¹⁷

Direct effect of change in SSB consumption on change in BMI

We conducted evidence reviews for impact of change in SSB intake on BMI, taking into account any dietary compensation.¹⁴ Four large longitudinal studies in adults^22‐25 of sufficient duration were identified. The relationship was modeled using a uniform distribution based on the range of the estimates of the effect of a one serving reduction on BMI (from 0.21 to 0.57). Among youth, a double‐blind randomized controlled trial conducted over 18 months found that an additional 8 oz serving of SSBs led to a 1 kg greater weight gain.²⁶

Reach

The intervention reaches all youth and adults ages 2 years and older in Seattle, WA.

Costs

The policy change will involve start up and ongoing labor costs for municipal tax department administrators. To implement the intervention, the municipal government will need to process tax statements and conduct audits. Businesses will also need to prepare tax statements and participate in audits, which will require labor from private tax accountants. The cost of implementation in this Seattle model assumes the city will administer the tax themselves and the activities and resources will mirror estimates from the state of WA from a previously planned (but not implemented) excise tax on soft drinks.¹⁴ Cost of tax implementation will vary between locations; the city of Berkeley for example has contracted with a third party to administer the tax at 2% of the annual revenue. ²⁷ The cost and benefit estimates do not include expected tax revenue.

CHOICES Microsimulation Model

The CHOICES microsimulation model for Seattle, WA was used to calculate the costs and effectiveness over ten years (2015–25). This is a stochastic, discrete‐time, individual‐level microsimulation model designed to simulate the experience of the Seattle, WA population from 2015 to 2025. Cases of obesity prevented were calculated at the end of the model in 2025. The model uses data from: US Census, American Community Survey, Behavioral Risk Factor Surveillance System²⁸, NHANES, National Survey of Children’s Health²⁹, the Medical Expenditure Panel Survey, and multiple national longitudinal studies. We calculated uncertainty intervals using Monte Carlo simulations programmed in Java over one thousand iterations of the model for a population of simulated individuals representing the city population size.¹⁴

Impact on Diabetes

We estimated the impact of the tax‐induced reduction in SSB intake on diabetes incidence for adults ages 18‐79 years using a published meta‐analysis of the relative risk of developing diabetes due to a one‐serving change in SSB consumption³⁰ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Seattle, WA, we estimated that the proposed SSB excise tax would lead to a 5% reduction in diabetes incidence – an estimated 130 cases of diabetes prevented – over a one‐year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

Based on calculations modeled from the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes,²⁰ we estimate a $0.0175/ounce excise tax in Seattle could raise approximately $24.7 million each year. This revenue estimate only includes sugar sweetened beverages, not diet beverages. Since diet beverages are consumed by adults at roughly half the rate of sugar sweetened beverages, the tax revenue will also be higher due to these consumption patterns.

Results

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.

*Not discounted.

Equity and Implementation Considerations

Concerns have been raised regarding the impact of the tax on households with low incomes. Because of the elasticity of ‐1.21, our analyses clearly indicate that households will spend less on SSBs after the tax goes into effect, providing disposable income for other purchases. In addition, we project that greater health benefits will accrue to low‐income consumers who on average consume more SSBs than higher income consumers; the same is true for a number of racial and ethnic groups. Disparities in obesity outcomes should thus decrease following implementation of the proposed tax. In addition, revenue raised from an SSB tax can be reinvested in low income communities; for instance, in Berkeley, CA SSB tax revenue has been allocated for spending on school and community programs, several with a focus on low income or minority populations, to promote healthy eating, diabetes and obesity prevention. ^31,32

There is opposition from the beverage industry, which spends over $4 billion/year nationwide on marketing.³³ Public support for such taxes generally increases with earmarking for prevention activities.³⁴ Relatively small beverage excise taxes are currently applied across many states. The proposed tax is likely to be sustainable if implemented based on the history of tobacco excise taxes. There is potential for a shift in social norms of SSB consumption based on evidence from tobacco control tax and regulatory efforts.³⁵

Discussion

We project that the proposed SSB excise tax policy will prevent thousands of cases of childhood and adult obesity, prevent new cases of diabetes, increase healthy life years and save more in future health care costs than it costs to implement. Revenue from the tax can be used for education and health promotion efforts. Implementing the tax could also serve as a powerful social signal to reduce sugar consumption.

Results prepared by the CHOICES project at the Harvard T.H. Chan School of Public Health: Gortmaker SL, Long MW, Ward ZJ, Giles CM, Barrett JL, Resch SC, Cradock AL. Funded by The JPB Foundation and Healthy Food America. Results are those of the authors and not the funders. For further information: contact cgiles@hsph.harvard.edu. Visit www.ChoicesProject.org

← Back to Resources

References

1. American Public Health Association. Taxes on Sugar-Sweetened Beverages. 2012.
2. Hakim D and Confessore N. Paterson seeks huge cuts and $1 billion in taxes and fees. The New York Times, Jan 19, 2010.
3. Falbe J, Rojas N, Grummon AH, Madsen KA. Higher Retail Prices of Sugar-Sweetened Beverages 3 Months After Implementation of an Excise Tax in Berkeley, California. Am J Public Health. 2015 Nov;105(11):2194-201.
4. Leonhardt D. The battle over taxing soda. The New York Times, May 19, 2010.
5. Wang YC, Bleich SN, and Gortmaker SL. Increasing caloric contribution from sugar-sweetened beverages and 100% fruit juices among US children and adolescents, 1988–2004. Pediatrics. 2008;121(6):e1604-e1614.
6. Bleich SN, Wang YC, Wang Y and Gortmaker SL. Increasing consumption of sugar-sweetened beverages among US adults: 1988–1994 to 1999—2004. Am J Clin Nutr. 2008;89(1):372-381.
7. Kit BK, Fakhouri TH, Park S, Nielsen SJ, Ogden CL. Trends in sugar-sweetened beverage consumption among youth and adults in the United States: 1999-2010. Am J Clin Nutr. 2013 Jul;98(1):180-8.
8. Malik VS, Pan A, Willett WC , Hu FB. Sugar-sweetened beverages and weight gain in children and adults: a systematic review and meta-analysis. Am J Clin Nutr. 2013;98(4):1084-1102.
9. Chen L, Caballero B, Mitchell DC, et al. Reducing consumption of sugar-sweetened beverages is associated with reduced blood pressure a prospective study among United States adults. Circulation. 2010;121(22):2398-2406.
10. U.S. Department of Health and Human Services and U.S. Department of Agriculture. 2015 – 2020 Dietary Guidelines for Americans. 8th Edition. December 2015. Available at http://health.gov/dietaryguidelines/2015/guidelines/.
11. Chaloupka FJ, Powell LM, and Chriqui JF. Sugar-sweetened beverage taxes and public health: A Research Brief. Minneapolis, MN: Robert Wood Johnson Foundation, Healthy Eating Research, 2009.
12. Brownell KD, Farley T, Willett WV, et al. The public health and economic benefits of taxing sugar-sweetened beverages. New Engl J Med. 2009;361(16):1599-1605.
13. 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.
14. Gortmaker SL, Wang YC, Long MW, Giles CM, Ward ZJ, Barrett JL, Kenney EL, Sonneville KR, Afzal AS, Resch SC, Cradock AL. Three Interventions That Reduce Childhood Obesity Are Projected To Save More Than They Cost To Implement. Health Aff (Millwood). 2015 Nov 1;34(11):1932-9.
15. Institute of Medicine. Local Government Actions to Prevent Childhood Obesity, 2009. National Academies Press: Washington, DC.
16. Colchero MA, Salgado JC, Unar-Munguía M, Molina M, Ng S, Rivera-Dommarco JA. Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas. PLoS ONE. 2015;10(12): e0144408.
17. Falbe J, Thompson HR, Becker CM, Rojas N, McCulloch CE, Madsen KA. Impact of the Berkeley Excise Tax on Sugar-Sweetened Beverage Consumption. Am J Public Health. 2016 Aug 23:e1-e7.
18. Ng SW, Silver L, Ryan-Ibarra S, Induni M, Hamma C, Poti J , Popkin B. Berkeley Evaluation of Soda Tax (BEST) Study Preliminary Findings. Presentation at the annual meeting of the American Public Health Association, Chicago, IL, November
19. Powell LM, Isgor z, Rimkus L, Chaloupka FJ. Sugar-sweetened beverage prices: Estimates from a national sample of food outlets. Chicago, IL: Bridging the Gap Program, Health Policy Center, Institute for Health Research and Policy, University of Illinois at Chicago, 2014. Available at: http://www.bridgingthegapresearch.org/_asset/ww9rpz/btg_SSB_price_brief_FINAL_Jan_2014.pdf.
20. UCONN Rudd Center. Revenue Calculator for Sugar-Sweetened Beverage Taxes. Jan 2014. Accessed March 2016, http://www.uconnruddcenter.org/revenue-calculator-for-sugar-sweetened-beverage-taxes.
21. Powell LM, Chriqui JF, Khan T, Wada R, Chaloupka FJ. Assessing the potential effectiveness of food and beverage taxes and subsidies for improving public health: a systematic review of prices, demand and body weight outcomes. Obes Rev. 2013;14(2): p. 110-28.
22. Chen L. Reduction in consumption of sugar-sweetened beverages is associated with weight loss: the PREMIER trial. Am J Clin Nutr. 2009;89(5):1299-306.
23. Mozaffarian D, Hao T, Rimm ER, Willett WC, Hu FB. Changes in diet and lifestyle and long-term weight gain in women and men. N Engl J Med. 2011;364(25): p. 2392-404.
24. Palmer JR, Boggs DA, Krishnan S, Hu FB, Singer M, Rosenberg L. Sugar-sweetened beverages and incidence of type 2 diabetes mellitus in African American women. Arch Intern Med. 2008;168(14): p. 1487-92.
25. Schulze MB, Mason JE, Ludwig D, et al. Sugar-sweetened beverages, weight gain, and incidence of type 2 diabetes in young and middle-aged women. JAMA. 2004;292(8): p. 927-34.
26. City of Berkeley Online Records; Contract with Muniservices; Contract # 9828; https://www.cityofberkeley.info/recordsonline/export/16802443.pdf ; Accessed 08/10/2017
27. de Ruyter JC, Olthof MR, Seidell JC, Katan MB. A trial of sugar-free or sugar-sweetened beverages and body weight in Children. N Engl Med. 2012;367(15):1397-1406.
28. Ward ZJ, Long MW, Resch SC, Gortmaker SL, Cradock AL, Giles C, Hsiao A, Wang YC. Redrawing the US Obesity Landscape: Bias-Corrected Estimates of State-Specific Adult Obesity Prevalence. PLoS One. 2016 Mar 8;11(3):e0150735.
29. Long MW, Ward ZJ, Resch SC, Cradock AL, Wang YC, Giles CM, Gortmaker SL. State-level estimates of childhood obesity prevalence in the United States corrected for report bias. Int J Obes (Lond). 2016 Aug 30.
30. Imamura F, O’Connor L, Ye Z, Mursu J, Hayashino Y, Bhupathiraju SN, Forouhi NG. Consumption of sugar sweetened beverages, artificially sweetened beverages, and fruit juice and incidence of type 2 diabetes. Br J Sports Med. 2016 Apr;50(8):496-504.
31. Lynn J. (2016, Jan 20). City council votes to allocate ‘soda tax’ revenue to school district, city organizations. The Daily Californian. Retrieved from http://www.dailycal.org/2016/01/20/city-council-votes-allocate-soda-tax-revenue-school-district-city-organizations/.
32. Berkeley City Council. (2016, June 14). Berkeley City Council meeting. [Annotated Agenda]. Retrieved from https://www.cityofberkeley.info/Clerk/City_Council/2016/06_June/City_Council__06-14-2016_-_Meeting_Info.aspx.
33. Federal Trade Commission. Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation —A Report to Congress. Washington, DC: Federal Trade Commission, Bureau of Consumer Protection and Bureau of Economics, 2008. https://www.ftc.gov/sites/default/files/documents/reports/marketing-food-children-and-adolescents-review-industry-expenditures-activities-and-self-regulation/p064504foodmktingreport.pdf
34. Friedman R. Public Opinion Data, 2013: New Haven, CT: Yale Rudd Center for Food Policy & Obesity.
35. Frieden TR, Mostashari F, Kerker BD, Miller N, Hajat A, Frankel M. Adult tobacco use levels after intensive tobacco control measures: New York City, 2002-2003. Am J Public Health. 2005;95(6):1016-1023.

The information in this brief is intended to provide educational information on the cost-effectiveness of SSB taxes.

Intervention Strategy Description

Implementation of a state excise tax of $0.01/ounce of sugar-sweetened beverages (SSBs) in Illinois, administered by the state department of revenue and based on proposals considered by federal, state, and local governments.^1-4 This analysis does not include the separate $0.01/ounce tax on SSBs and diet beverages recently passed in Cook County.

Background

SSBs include all beverages with added caloric sweeteners. The modeled excise tax does not apply to 100% juice, milk products, or artificially-sweetened beverages. Although SSB consumption has declined in recent years, children and adults in the U.S. consume twice as many calories from SSBs compared to 30 years ago.^5-7 Randomized trials and longitudinal studies have linked SSB consumption to excess weight gain, diabetes, and cardiovascular disease. Consumption of SSBs increases the risk of chronic diseases through its impact on BMI and other mechanisms.^8,9 The Dietary Guidelines for Americans, 2015¹⁰ recommends that individuals reduce SSB intake in order to manage their body weight. Drawing on the success of tobacco taxation and decades of economic research, public health experts have called for higher taxes on SSBs and documented their likely impact.^11-14 In 2009, the IOM recommended that local governments implement tax strategies to reduce consumption of “calorie-dense, nutrient-poor foods,” emphasizing SSBs as an apt target for taxation.¹⁵

Modeling Framework

Increased state excise tax linked to change in BMI through change in SSB price and consumption.

Impact of Tax on Price to Consumers

We assume 100% pass through of the tax over the ten years. Empirical studies in Mexico and France indicate that approximately the full amount of the excise tax is passed on to consumers. ¹⁶  Short term studies for the local tax in Berkeley indicate less than complete pass-through. ^3,17,18  The expected percent increase in SSB price was estimated based on the average $0.059/ounce reported in a review of beverage demand elasticity (inflated to $0.0612 in 2014 dollars).¹⁹  The price per ounce in this study  was based on a weighted average across stores, restaurants and other sources proportional to the source of consumed SSBs in NHANES 2009-2010.  The price per ounce of SSBs purchased in stores was calculated using weighted averages of two-liter bottles, 12-can cases, and single-serve bottles or cans based on the distribution of package sizes estimated from 2010 Nielsen Homescan data.  The $0.01/ounce excise tax would result in a 16.3% price increase.  We assumed that the tax rate would be adjusted annually for inflation to maintain the 16.3% price increase throughout the ten-year modeling time frame.

SSB Consumption and Price Elasticity of Demand

We used regionally-adjusted estimates of total SSB consumption in 2015 published in the UCONN Rudd Center Revenue Calculator for Sugar-Sweetened Beverage Taxes to adjust national age, sex, and race/ethnicity-specific consumption data from NHANES 2005-2010 to estimate current SSB consumption levels in Illinois.²⁰ Powell et al reviewed studies published 2007-2012 and estimated a mean own-price elasticity of demand for SSBs weighted by SSB category consumption shares of -1.21, ranging from -3.87 to -0.69. ²¹ Recent research concerning the Berkeley tax indicates a 21% reduction in SSB intake among low income populations. ¹⁷

Direct effect of change in SSB consumption on change in BMI

We conducted evidence reviews for impact of change in SSB intake on BMI, taking into account any dietary compensation.¹⁶ Four large longitudinal studies in adults^22-25  of sufficient duration were identified.  The relationship was modeled using a uniform distribution based on the range of the estimates of the effect of a one serving reduction on BMI (from 0.21 to 0.57).  Among youth, a double-blind randomized controlled trial conducted over 18 months found that an additional 8 oz serving of SSBs led to a 1 kg greater weight gain. ²⁶

Reach

The intervention reaches all youth and adults ages 2 years and older in Illinois.

Costs

The policy change will involve start up and ongoing labor costs for state tax department administrators.  To implement the intervention, the state government will need to process tax statements and conduct audits.  Businesses will also need to prepare tax statements and participate in audits, which will require labor from private tax accountants.  Cost information was drawn from states with planned or implemented excise taxes on soft drinks.¹⁴ The cost and benefit estimates do not include expected tax revenue.

CHOICES Microsimulation Model

The CHOICES microsimulation model for Illinois was used to calculate the costs and effectiveness over ten years (2015–25). This is a stochastic, discrete-time, individual-level microsimulation model designed to simulate the experience of the Illinois population from 2015 to 2025. Cases of obesity prevented were calculated at the end of the model in 2025. The model uses data from: US Census, American Community Survey, Behavioral Risk Factor Surveillance System²⁷, NHANES, National Survey of Children’s Health²⁸, the Medical Expenditure Panel Survey, and multiple national longitudinal studies. We calculated uncertainty intervals using Monte Carlo simulations programmed in Java over one thousand iterations of the model for a population of one million simulated individuals scaled to the state population size.¹⁴

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Illinois, we estimated that the proposed SSB excise tax would lead to a 9% reduction in diabetes incidence- an estimated 5,810 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Health Policy Center at the Institute for Health Research and Policy at the University of Illinois at Chicago ³⁰, a $0.01/ounce excise tax in Illinois could raise approximately $561 million each year.

Results

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.

*Not discounted.

Equity and Implementation Considerations

Concerns have been raised regarding the impact of the tax on households with low incomes. Because of the elasticity of -1.21, our analyses clearly indicates that households will spend less on SSBs after the tax goes into effect, providing disposable income for other purchases. In addition, we project that greater health benefits will accrue to low-income consumers who on average consume more SSBs than higher income consumers; the same is true for a number of racial and ethnic groups. Disparities in obesity outcomes should thus decrease following implementation of the proposed tax. In addition, revenue raised from an SSB tax can be reinvested in low income communities; for instance, in Berkeley, CA SSB tax revenue has been allocated for spending on school and community programs, several with a focus on low income or minority populations, to promote healthy eating, diabetes and obesity prevention.^31,32

There is opposition from the beverage industry, which spends over $4 billion/year nationwide on marketing.³³  Public support for such taxes generally increases with earmarking for prevention activities.³⁴  Relatively small beverage excise taxes are currently applied across many states.  The proposed tax is likely to be sustainable if implemented based on the history of tobacco excise taxes.  There is potential for a shift in social norms of SSB consumption based on evidence from tobacco control tax and regulatory efforts.³⁵

Discussion

We project that the proposed SSB excise tax policy will prevent thousands of cases of childhood and adult obesity, prevent new cases of diabetes, increase healthy life years and save more in future health care costs than it costs to implement. Revenue from the tax can be used for education and health promotion efforts.   Implementing the tax could also serve as a powerful social signal to reduce sugar consumption. The additional $0.01/ounce tax on SSBs and diet beverages passed in Cook County would result in an even greater impact on heath outcomes and health care cost savings for Cook County residents not modeled in this analysis.

Results prepared by the CHOICES project at the Harvard T.H. Chan School of Public Health: Gortmaker SL, Long MW, Ward ZJ, Giles CM, Barrett JL, Resch SC, Cradock AL. Funded by The JPB Foundation and Healthy Food America. Results are those of the authors and not the funders. For further information:  contact cgiles@hsph.harvard.edu.  Visit www.choicesproject.org

← Back to Resources

References

1. American Public Health Association. Taxes on Sugar-Sweetened Beverages. 2012.
2. Hakim D and Confessore N. Paterson seeks huge cuts and $1 billion in taxes and fees. The New York Times, Jan 19, 2010.
3. Falbe J, Rojas N, Grummon AH, Madsen KA. Higher Retail Prices of Sugar-Sweetened Beverages 3 Months After Implementation of an Excise Tax in Berkeley, California. Am J Public Health. 2015 Nov;105(11):2194-201.
4. Leonhardt D. The battle over taxing soda. The New York Times, May 19, 2010.
5. Wang YC, Bleich SN, and Gortmaker SL. Increasing caloric contribution from sugar-sweetened beverages and 100% fruit juices among US children and adolescents, 1988–2004. Pediatrics. 2008;121(6):e1604-e1614.
6. Bleich SN, Wang YC, Wang Y and Gortmaker SL. Increasing consumption of sugar-sweetened beverages among US adults: 1988–1994 to 1999—2004. Am J Clin Nutr. 2008;89(1):372-381.
7. Kit BK, Fakhouri TH, Park S, Nielsen SJ, Ogden CL. Trends in sugar-sweetened beverage consumption among youth and adults in the United States: 1999-2010. Am J Clin Nutr. 2013 Jul;98(1):180-8.
8. Malik VS, Pan A, Willett WC , Hu FB. Sugar-sweetened beverages and weight gain in children and adults: a systematic review and meta-analysis. Am J Clin Nutr. 2013;98(4):1084-1102.
9. Chen L, Caballero B, Mitchell DC, et al. Reducing consumption of sugar-sweetened beverages is associated with reduced blood pressure a prospective study among United States adults. Circulation. 2010;121(22):2398-2406.
10. S. Department of Health and Human Services and U.S. Department of Agriculture. 2015 – 2020 Dietary Guidelines for Americans. 8th Edition. December 2015. Available at http://health.gov/dietaryguidelines/2015/guidelines/.
11. Chaloupka FJ, Powell LM, and Chriqui JF. Sugar-sweetened beverage taxes and public health: A Research Brief. Minneapolis, MN: Robert Wood Johnson Foundation, Healthy Eating Research, 2009.
12. Brownell KD, Farley T, Willett WV, et al. The public health and economic benefits of taxing sugar-sweetened beverages. New Engl J Med. 2009;361(16):1599-1605.
13. 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.
14. Gortmaker SL, Wang YC, Long MW, Giles CM, Ward ZJ, Barrett JL, Kenney EL, Sonneville KR, Afzal AS, Resch SC, Cradock AL. Three Interventions That Reduce Childhood Obesity Are Projected To Save More Than They Cost To Implement. Health Aff (Millwood). 2015 Nov 1;34(11):1932-9.
15. Institute of Medicine. Local Government Actions to Prevent Childhood Obesity, 2009. National Academies Press: Washington, DC.
16. Colchero MA, Salgado JC, Unar-Munguía M, Molina M, Ng S, Rivera-Dommarco JA. Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas. PLoS ONE. 2015;10(12): e0144408.
17. Falbe J, Thompson HR, Becker CM, Rojas N, McCulloch CE, Madsen KA. Impact of the Berkeley Excise Tax on Sugar-Sweetened Beverage Consumption. Am J Public Health. 2016 Aug 23:e1-e7.
18. Ng SW, Silver L, Ryan-Ibarra S, Induni M, Hamma C, Poti J , Popkin B. Berkeley Evaluation of Soda Tax (BEST) Study Preliminary Findings. Presentation at the annual meeting of the American Public Health Association, Chicago, IL, November.
19. Powell LM, Isgor z, Rimkus L, Chaloupka FJ. Sugar-sweetened beverage prices: Estimates from a national sample of food outlets. Chicago, IL: Bridging the Gap Program, Health Policy Center, Institute for Health Research and Policy, University of Illinois at Chicago, 2014. Available at: http://www.bridgingthegapresearch.org/_asset/ww9rpz/btg_SSB_price_brief_FINAL_Jan_2014.pdf.
20. UCONN Rudd Center. Revenue Calculator for Sugar-Sweetened Beverage Taxes. Jan 2014. Accessed March 2016, http://www.uconnruddcenter.org/revenue-calculator-for-sugar-sweetened-beverage-taxes.
21. Powell LM, Chriqui JF, Khan T, Wada R, Chaloupka FJ. Assessing the potential effectiveness of food and beverage taxes and subsidies for improving public health: a systematic review of prices, demand and body weight outcomes. Obes Rev. 2013;14(2): p. 110-28.
22. Chen L. Reduction in consumption of sugar-sweetened beverages is associated with weight loss: the PREMIER trial. Am J Clin Nutr. 2009;89(5):1299-306.
23. Mozaffarian D, Hao T, Rimm ER, Willett WC, Hu FB. Changes in diet and lifestyle and long-term weight gain in women and men. N Engl J Med. 2011;364(25): p. 2392-404.
24. Palmer JR, Boggs DA, Krishnan S, Hu FB, Singer M, Rosenberg L. Sugar-sweetened beverages and incidence of type 2 diabetes mellitus in African American women. Arch Intern Med. 2008;168(14): p. 1487-92.
25. Schulze MB, Mason JE, Ludwig D, et al. Sugar-sweetened beverages, weight gain, and incidence of type 2 diabetes in young and middle-aged women. JAMA. 2004;292(8): p. 927-34.
26. de Ruyter JC, Olthof MR, Seidell JC, Katan MB. A trial of sugar-free or sugar-sweetened beverages and body weight in Children. N Engl Med. 2012;367(15):1397-1406.
27. Ward ZJ, Long MW, Resch SC, Gortmaker SL, Cradock AL, Giles C, Hsiao A, Wang YC. Redrawing the US Obesity Landscape: Bias-Corrected Estimates of State-Specific Adult Obesity Prevalence. PLoS One. 2016 Mar 8;11(3):e0150735.
28. Long MW, Ward ZJ, Resch SC, Cradock AL, Wang YC, Giles CM, Gortmaker SL. State-level estimates of childhood obesity prevalence in the United States corrected for report bias. Int J Obes (Lond). 2016 Aug 30.
29. Imamura F, O’Connor L, Ye Z, Mursu J, Hayashino Y, Bhupathiraju SN, Forouhi NG. Consumption of sugar sweetened beverages, artificially sweetened beverages, and fruit juice and incidence of type 2 diabetes. Br J Sports Med. 2016 Apr;50(8):496-504.
30. Chaloupka, FJ. Revenue Implications of a Sugary Beverage Tax in Illinois. A BTG Research Brief. Chicago, IL: Bridging the Gap Program, Health Policy Center, Institute for Health Research and Policy, University of Illinois at Chicago; 2017
31. Lynn J. (2016, Jan 20). City council votes to allocate ‘soda tax’ revenue to school district, city organizations. The Daily Californian. Retrieved from http://www.dailycal.org/2016/01/20/city-council-votes-allocate-soda-tax-revenue-school-district-city-organizations/.
32. Berkeley City Council. (2016, June 14). Berkeley City Council meeting. [Annotated Agenda]. Retrieved from https://www.cityofberkeley.info/Clerk/City_Council/2016/06_June/City_Council__06-14-2016_-_Meeting_Info.aspx.
33. Federal Trade Commission. Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation —A Report to Congress. Washington, DC: Federal Trade Commission, Bureau of Consumer Protection and Bureau of Economics, 2008. https://www.ftc.gov/sites/default/files/documents/reports/marketing-food-children-and-adolescents-review-industry-expenditures-activities-and-self-regulation/p064504foodmktingreport.pdf
34. Friedman R. Public Opinion Data, 2013: New Haven, CT: Yale Rudd Center for Food Policy & Obesity.
35. Frieden TR, Mostashari F, Kerker BD, Miller N, Hajat A, Frankel M. Adult tobacco use levels after intensive tobacco control measures: New York City, 2002-2003. Am J Public Health. 2005;95(6):1016-1023.

The information in this brief is intended to provide educational information on the cost effectiveness of SSB taxes.

Intervention Strategy Description

Implementation of an increase of the state excise tax by either $0.02/ounce or $0.01/ounce of sugar-sweetened beverages (SSBs), administered by the West Virgina Department of Revenue and based on the current excise tax in West Virginia.¹   

Background

SSBs include all beverages with added caloric sweeteners.  The modeled excise tax does not apply to 100% juice, milk products, or artificially-sweetened beverages. Although SSB consumption has declined in recent years, children and adults in the U.S. consume twice as many calories from SSBs compared to 30 years ago.^2-4  Randomized trials and longitudinal studies have linked SSB consumption to excess weight gain, diabetes, and cardiovascular disease.  Consumption of SSBs increases the risk of chronic diseases through its impact on BMI and other mechanisms.^5-6  The Dietary Guidelines for Americans, 2015⁷ recommends that individuals reduce SSB intake in order to manage their body weight.  Drawing on the success of tobacco taxation and decades of economic research, public health experts have called for higher taxes on SSBs and documented their likely impact.^8-11  In 2009, the IOM recommended that local governments implement tax strategies to reduce consumption of “calorie-dense, nutrient-poor foods,” emphasizing SSBs as an apt target for taxation.¹²

Modeling Framework

Increased state excise tax linked to change in BMI through change in SSB price and consumption.

Impact of Tax on Price to Consumers

We assume 100% pass through of the tax over the ten years. Empirical studies in France and Mexico indicate that approximately the full amount of the excise tax is passed on to consumers.¹³  Short term studies for the local tax in Berkeley indicate less than complete pass-through. ^14-16 The expected percent increase in SSB price was estimated based on the average $0.059/ounce reported in a review of beverage demand elasticity (inflated to $0.0612 in 2014 dollars).¹⁷  The price per ounce in this study  was based on a weighted average across stores, restaurants and other sources proportional to the source of consumed SSBs in NHANES 2009-2010.  The price per ounce of SSBs purchased in stores was calculated using weighted averages of two-liter bottles, 12-can cases, and single-serve bottles or cans based on the distribution of package sizes estimated from 2010 Nielsen Homescan data.  The $0.02/ounce increased excise tax would result in a 32.7% price increase; the $0.01/ounce increased  excise tax in a 16.3% price increase.  We assumed that the tax rate would be adjusted annually for inflation to maintain the 32.7% or 16.3% price increase throughout the ten-year modeling time frame.

SSB Consumption and Price Elasticity of Demand

We used regionally-adjusted estimates of total SSB consumption in 2015 published in the UCONN Rudd Center Revenue Calculator for Sugar-Sweetened Beverage Taxes to adjust national age, sex, and race/ethnicity-specific consumption data from NHANES 2005-2010 to estimate current SSB consumption levels in West Virginia.¹⁸ Powell et al reviewed studies published 2007-2012 and estimated a mean own-price elasticity of demand for SSBs weighted by SSB category consumption shares of -1.21, ranging from -3.87 to -0.69. ¹⁹ Recent research concerning the Berkeley tax indicates a 21% reduction in SSB intake among low income populations. ¹⁵

Direct effect of change in SSB consumption on change in BMI

We conducted evidence reviews for impact of change in SSB intake on BMI, taking into account any dietary compensation.¹¹ Four large longitudinal studies in adults^20-23  of sufficient duration were identified.  The relationship was modeled using a uniform distribution based on the range of the estimates of the effect of a one serving reduction on BMI (from 0.21 to 0.57).  Among youth, a double-blind randomized controlled trial conducted over 18 months found that an additional 8 oz serving of SSBs led to a 1 kg greater weight gain. ²⁴

Reach

The intervention reaches all youth and  adults ages 2 years and older in West Virginia.

Costs

This policy change would involve an increase in the amount of state excise tax currently collected in West Virginia. We assume that increased costs above the current required costs to implement the tax will be incurred in the first year of implementation to account for changes to the amount of the tax, including labor costs for state tax department administrators to process tax statements and conduct audits.  Businesses will also need to deal with increased costs in the first year in dealing with the change to the tax amount in preparing tax statements and participating in audits, which will require labor from private tax accountants.  Cost information was drawn from estimates from West Virginia on implementation of its current excise taxes on soft drinks.¹¹ The cost and benefit estimates do not include expected tax revenue.

CHOICES Microsimulation Model

The CHOICES microsimulation model for West Virginia was used to calculate the costs and effectiveness over ten years (2015–25). This is a stochastic, discrete-time, individual-level microsimulation model designed to simulate the experience of the West Virginia population from 2015 to 2025. Cases of obesity prevented were calculated at the end of the model in 2025. The model uses data from: US Census, American Community Survey, Behavioral Risk Factor Surveillance System, ²⁵ NHANES, National Survey of Children’s Health, ²⁶ the Medical Expenditure Panel Survey, and multiple longitudinal studies. We calculated uncertainty intervals using Monte Carlo simulations programmed in Java over one thousand iterations of the model for a population of one million simulated individuals scaled to the state population size.¹¹

Impact on Diabetes

 We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁷ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In West Virginia, we estimated that the $0.02/ounce SSB increased excise tax would lead to an 15% reduction in diabetes incidence- an estimated 1,870 cases of diabetes prevented- over a one-year period once the tax reaches its full effect; the $0.01/ounce SSB increased excise tax would lead to an 8% reduction in diabetes incidencean estimated 960 cases of diabetes prevented- over this same time frame.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes ¹⁸, a $0.01/ounce excise tax in West Virginia could raise approximately $89 million in 2016.  Based on calculations modeled from the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes¹⁸, we estimated a $0.02/ounce excise tax could raise approximately $128 million each year.

Results

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.
ᵻ These costs include the difference between the cost to implement the intervention and the healthcare cost savings produced over 10 years.

Equity and Implementation Considerations

Concerns have been raised regarding the impact of the tax on households with low incomes. Because of the elasticity of -1.21, our analyses clearly indicate that households will spend less on SSBs after the tax goes into effect (an estimated $48 million per year less), providing disposable income income for other purchases. In addition, we project that greater health benefits will accrue to low-income consumers who on average consume more SSBs than higher income consumers; the same is true for a number of racial and ethnic groups. Disparities in obesity outcomes should thus decrease following implementation of the proposed tax. In addition, revenue raised from an SSB tax can be reinvested in low income communities; for instance, in Berkeley, CA SSB tax revenue has been allocated for spending on school and community programs, several with a focus on low income or minority populations, to promote healthy eating, diabetes and obesity prevention.^28-29 There is also substantial evidence that reductions in SSB consumption can also reduce dental caries. ^30-31

There is opposition from the beverage industry, which spends over $4 billion/year nationwide on marketing.³²  Public support for such taxes generally increases with earmarking for prevention activities.³³  Relatively small beverage excise taxes are currently applied across many states.  The proposed tax is likely to be sustainable if implemented based on history of tobacco excise taxes.  There is potential for a shift in social norms of SSB consumption based on evidence from the tobacco control tax and regulatory efforts.³⁴

Discussion

We project that an increase in the state SSB excise tax by $0.02/ounce will prevent thousands of cases of childhood and adult obesity, prevent new cases of diabetes, increase healthy life years and save more in future health care costs than it costs to implement, with a lower impact for an increase of $0.01/ounce tax. Revenue from the tax can be used for education and health promotion efforts.  Implementing the tax could also serve as a powerful social signal to reduce sugar consumption.

Results prepared by the CHOICES project at the Harvard T.H. Chan School of Public Health: Gortmaker SL, Long MW, Ward ZJ, Giles CM, Barrett JL, Resch SC, Cradock AL. Funded by The JPB Foundation and Healthy Food America. Results are those of the authors and not the funders. For further information contact choicesproject@hsph.harvard.edu. 

← Back to Resources

References

1. 11-19-1 of the Code of West Virginia. http://www.legis.state.wv.us/wvcode/code.cfm?chap=11&art=19.
2. Wang YC, Bleich SN, and Gortmaker SL. Increasing caloric contribution from sugar-sweetened beverages and 100% fruit juices among US children and adolescents, 1988–2004. Pediatrics. 2008;121(6):e1604-e1614.
3. Bleich SN, Wang YC, Wang Y and Gortmaker SL. Increasing consumption of sugar-sweetened beverages among US adults: 1988–1994 to 1999—2004. Am J Clin Nutr. 2008;89(1):372-381.
4. Kit BK, Fakhouri TH, Park S, Nielsen SJ, Ogden CL. Trends in sugar-sweetened beverage consumption among youth and adults in the United States: 1999-2010. Am J Clin Nutr. 2013 Jul;98(1):180-8.
5. Malik VS, Pan A, Willett WC , Hu FB. Sugar-sweetened beverages and weight gain in children and adults: a systematic review and meta-analysis. Am J Clin Nutr. 2013;98(4):1084-1102.
6. Chen L, Caballero B, Mitchell DC, et al. Reducing consumption of sugar-sweetened beverages is associated with reduced blood pressure a prospective study among United States adults. Circulation. 2010;121(22):2398-2406.
7. S. Department of Health and Human Services and U.S. Department of Agriculture. 2015 – 2020 Dietary Guidelines for Americans. 8th Edition. December 2015. Available at http://health.gov/dietaryguidelines/2015/guidelines/.
8. Chaloupka FJ, Powell LM, and Chriqui JF. Sugar-sweetened beverage taxes and public health: A Research Brief. Minneapolis, MN: Robert Wood Johnson Foundation, Healthy Eating Research, 2009.
9. Brownell KD, Farley T, Willett WV, et al. The public health and economic benefits of taxing sugar-sweetened beverages. New Engl J Med. 2009;361(16):1599-1605.
10. 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.
11. Gortmaker SL, Wang YC, Long MW, Giles CM, Ward ZJ, Barrett JL, Kenney EL, Sonneville KR, Afzal AS, Resch SC, Cradock AL. Three Interventions That Reduce Childhood Obesity Are Projected To Save More Than They Cost To Implement. Health Aff (Millwood). 2015 Nov 1;34(11):1932-9.
12. Institute of Medicine. Local Government Actions to Prevent Childhood Obesity, 2009. National Academies Press: Washington, DC.
13. Colchero MA, Salgado JC, Unar-Munguía M, Molina M, Ng S, Rivera-Dommarco JA. Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas. PLoS ONE. 2015;10(12): e0144408.
14. Falbe J, Rojas N, Grummon AH, Madsen KA. Higher Retail Prices of Sugar-Sweetened Beverages 3 Months After Implementation of an Excise Tax in Berkeley, California. Am J Public Health. 2015 Nov;105(11):2194-201.
15. Falbe J, Thompson HR, Becker CM, Rojas N, McCulloch CE, Madsen KA. Impact of the Berkeley Excise Tax on Sugar-Sweetened Beverage Consumption. Am J Public Health. 2016 Aug 23:e1-e7.
16. Ng SW, Silver L, Ryan-Ibarra S, Induni M, Hamma C, Poti J , Popkin B. Berkeley Evaluation of Soda Tax (BEST) Study Preliminary Findings. Presentation at the American Public Health Association, Chicago, IL, November 2015.
17. Powell LM, Isgor z, Rimkus L, Chaloupka FJ. Sugar-sweetened beverage prices: Estimates from a national sample of food outlets. Chicago, IL: Bridging the Gap Program, Health Policy Center, Institute for Health Research and Policy, University of Illinois at Chicago, 2014. Available at: http://www.bridgingthegapresearch.org/_asset/ww9rpz/btg_SSB_price_brief_FINAL_Jan_2014.pdf.
18. UCONN Rudd Center. Revenue Calculator for Sugar-Sweetened Beverage Taxes. Jan 2014. Accessed March 2016, http://www.uconnruddcenter.org/revenue-calculator-for-sugar-sweetened-beverage-taxes.
19. Powell LM, Chriqui JF, Khan T, Wada R, Chaloupka FJ. Assessing the potential effectiveness of food and beverage taxes and subsidies for improving public health: a systematic review of prices, demand and body weight outcomes. Obes Rev. 2013;14(2): p. 110-28.
20. Chen L. Reduction in consumption of sugar-sweetened beverages is associated with weight loss: the PREMIER trial. Am J Clin Nutr. 2009;89(5):1299-306.
21. Mozaffarian D, Hao T, Rimm ER, Willett WC, Hu FB. Changes in diet and lifestyle and long-term weight gain in women and men. N Engl J Med. 2011;364(25): p. 2392-404.
22. Palmer JR, Boggs DA, Krishnan S, Hu FB, Singer M, Rosenberg L. Sugar-sweetened beverages and incidence of type 2 diabetes mellitus in African American women. Arch Intern Med. 2008;168(14): p. 1487-92.
23. Schulze MB, Mason JE, Ludwig D, et al. Sugar-sweetened beverages, weight gain, and incidence of type 2 diabetes in young and middle-aged women. JAMA. 2004;292(8): p. 927-34.
24. de Ruyter JC, Olthof MR, Seidell JC, Katan MB. A trial of sugar-free or sugar-sweetened beverages and body weight in Children. N Engl Med. 2012;367(15):1397-1406.
25. Ward ZJ, Long MW, Resch SC, Gortmaker SL, Cradock AL, Giles C, Hsiao A, Wang YC. Redrawing the US Obesity Landscape: Bias-Corrected Estimates of State-Specific Adult Obesity Prevalence. PLoS One. 2016 Mar 8;11(3):e0150735.
26. Long MW, Ward ZJ, Resch SC, Cradock AL, Wang YC, Giles CM, Gortmaker SL. State-level estimates of childhood obesity prevalence in the United States corrected for report bias. Int J Obes (Lond). 2016 Aug 30.
27. Imamura F, O’Connor L, Ye Z, Mursu J, Hayashino Y, Bhupathiraju SN, Forouhi NG. Consumption of sugar sweetened beverages, artificially sweetened beverages, and fruit juice and incidence of type 2 diabetes. Br J Sports Med. 2016 Apr;50(8):496-504.
28. Lynn J. (2016, Jan 20). City council votes to allocate ‘soda tax’ revenue to school district, city organizations. The Daily Californian. Retrieved from http://www.dailycal.org/2016/01/20/city-council-votes-allocate-soda-tax-revenue-school-district-city-organizations/.
29. Berkeley City Council. (2016, June 14). Berkeley City Council meeting. [Annotated Agenda]. Retrieved from https://www.cityofberkeley.info/Clerk/City_Council/2016/06_June/City_Council__06-14-2016_-_Meeting_Info.aspx.
30. Moynihan PJ, Kelly SA. Effect on caries of restricting sugars intake: systematic review to inform WHO guidelines. J Dent Res. 2014 Jan;93(1):8-18.
31. Wilder JR, Kaste LM, Handler A, Chapple-McGruder T, Rankin KM. The association between sugar-sweetened beverages and dental caries among third-grade students in Georgia. J Public Health Dent. 2016 Winter;76(1):76-84.
32. Federal Trade Commission. Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation —A Report to Congress. Washington, DC: Federal Trade Commission, Bureau of Consumer Protection and Bureau of Economics, 2008. https://www.ftc.gov/sites/default/files/documents/reports/marketing-food-children-and-adolescents-review-industry-expenditures-activities-and-self-regulation/p064504foodmktingreport.pdf
33. Friedman R. Public Opinion Data, 2013: New Haven, CT: Yale Rudd Center for Food Policy & Obesity.
34. Frieden TR, Mostashari F, Kerker BD, Miller N, Hajat A, Frankel M. Adult tobacco use levels after intensive tobacco control measures: New York City, 2002-2003. Am J Public Health. 2005;95(6):1016-1023.

The information in this brief is intended to provide educational information on the cost-effectiveness of SSB taxes.

Intervention Strategy Description

Implementation of a city excise tax of $0.01/ounce of sugar-sweetened beverages (SSBs), administered by each city’s department of revenue and based on proposals considered by federal, state, and local governments.^1-4

Background

SSBs include all beverages with added caloric sweeteners.  The modeled excise tax does not apply to 100% juice, milk products, or artificially-sweetened beverages. Although SSB consumption has declined in recent years, children and adults in the U.S. consume twice as many calories from SSBs compared to 30 years ago.^5-7  Randomized trials and longitudinal studies have linked SSB consumption to excess weight gain, diabetes, and cardiovascular disease.  Consumption of SSBs increases the risk of chronic diseases through its impact on BMI and other mechanisms.^8,9  The Dietary Guidelines for Americans, 2015¹⁰ recommends that individuals reduce SSB intake in order to manage their body weight.  Drawing on the success of tobacco taxation and decades of economic research, public health experts have called for higher taxes on SSBs and documented their likely impact.^11-14  In 2009, the IOM recommended that local governments implement tax strategies to reduce consumption of “calorie-dense, nutrient-poor foods,” emphasizing SSBs as an apt target for taxation.¹⁵

Modeling Framework

Municipal excise tax in large cities in the United States with the authority to implement such a tax linked to change in BMI through change in SSB price and consumption.

Impact of Tax on Price to Consumers

We assume 100% pass through of the tax over the ten years. Empirical studies of SSB excise taxes in Mexico and France indicate that approximately  the full amount of the excise tax is passed on to consumers.¹⁶  Short term studies for the local tax in Berkeley indicate less than complete pass-through. ^3,17,18 The expected percent increase in SSB price was estimated based on the average $0.059/ounce reported in a review of beverage demand elasticity (inflated to $0.0612 in 2014 dollars).¹⁹  The price per ounce in this study  was based on a weighted average across stores, restaurants and other sources proportional to the source of consumed SSBs in NHANES 2009-2010.  The price per ounce of SSBs purchased in stores was calculated using weighted averages of two-liter bottles, 12-can cases, and single-serve bottles or cans based on the distribution of package sizes estimated from 2010 Nielsen Homescan data.  The $0.01/ounce increased excise tax results in a 16.3% price increase.  We assumed that the tax rate would be adjusted annually for inflation to maintain the 16.3% price increase throughout the ten-year modeling time frame.

SSB Consumption and Price Elasticity of Demand

We used regionally-adjusted estimates of total SSB consumption in 2015 published in the UCONN Rudd Center Revenue Calculator for Sugar-Sweetened Beverage Taxes to adjust national age, sex, and race/ethnicity-specific consumption data from NHANES 2005-2010 to estimate current SSB consumption levels in each of the cities studied.²⁰ Powell et al reviewed studies published 2007-2012 and estimated a mean own-price elasticity of demand for SSBs weighted by SSB category consumption shares of -1.21, ranging from -3.87 to -0.69. ²¹ Recent research concerning the Berkeley tax indicates a 21% reduction in SSB intake among low income populations.¹⁷

Direct effect of change in SSB consumption on change in BMI

We conducted evidence reviews for the impact of change in SSB intake on change in BMI, taking into account any dietary compensation.¹⁶ Four large longitudinal studies in adults^22-25  of sufficient duration were identified.  The relationship was modeled using a uniform distribution based on the range of the estimates of the effect of a one serving reduction on BMI (from 0.21 to 0.57).  Among youth, a double-blind randomized controlled trial conducted over 18 months found that an additional 8 oz serving of SSBs led to a 1 kg greater weight gain. ²⁶

Reach

The intervention reaches all youth and adults ages 2 years and older in each of the 15 cities studied.

Costs

The policy change will involve start up and ongoing labor costs for municipal tax department administrators.  To implement the intervention, the municipal government will need to process tax statements and conduct audits.  Businesses will also need to prepare tax statements and participate in audits, which will require labor from private tax accountants.  Cost information was drawn from states with planned or implemented excise taxes on soft drinks.¹⁴ The cost and benefit estimates do not include expected tax revenue.

CHOICES Microsimulation Model

The CHOICES microsimulation model for each of these 15 cities was used to calculate the costs and effectiveness over ten years (2015–25). This is a stochastic, discrete-time, individual-level microsimulation model designed to simulate the experience of the city population from 2015 to 2025. Cases of obesity prevented were calculated at the end of the model in 2025. The model uses data from: US Census, American Community Survey, Behavioral Risk Factor Surveillance System, ²⁷ NHANES, National Survey of Children’s Health, ²⁸ the Medical Expenditure Panel Survey, and multiple longitudinal studies. We calculated uncertainty intervals using Monte Carlo simulations programmed in Java over one thousand iterations of the model for a population of simulated individuals representing each city’s population size.¹⁴

Impact on Diabetes

 We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In the 15 cities studied, we estimated the $0.01/ounce SSB excise tax would lead to an average  6% reduction in diabetes incidence- an estimated average 325 cases of diabetes prevented- over a one-year period once the tax reaches its full effect; Seattle would have the lowest reduction in cases of diabetes prevented (97; 4% reduction in diabetes incidence), while Los Angeles would have the highest reduction in cases of diabetes prevented (779; 4% reduction in diabetes incidence).

Results

Estimates and 95% uncertainty intervals. (Click on city names to jump to full city-specific tables in the Appendix).

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.

*Not discounted.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes and calculations modeled off their calculator, ²⁰  a $0.01/ounce excise tax in these 15 cities could raise a total of over $600 million in the first year of implementation.

Equity and Implementation Considerations

Concerns have been raised regarding the impact of the tax on households with low incomes. Because of the elasticity of -1.21, our analyses clearly indicate that households will spend less on SSBs after the tax goes into effect, providing disposable income for other purchases. In addition, we project that greater health benefits will accrue to low-income consumers who on average consume more SSBs than higher income consumers; the same is true for a number of racial and ethnic groups. Disparities in obesity outcomes should thus decrease following implementation of the proposed tax. In addition, revenue raised from an SSB tax can be reinvested in low income communities; for instance, in Berkeley, CA SSB tax revenue has been allocated for spending on school and community programs, several with a focus on low income or minority populations, to promote healthy eating, diabetes and obesity prevention.^30,31

There is opposition from the beverage industry, which spends over $4 billion/year nationwide on marketing.³²  Public support for such taxes generally increases with earmarking for prevention activities.³³  Relatively small beverage excise taxes are currently applied across many states.  The proposed tax is likely to be sustainable if implemented based on the history of tobacco excise taxes.  There is potential for a shift in social norms of SSB consumption based on evidence from tobacco control tax and regulatory efforts.³⁴

Discussion

We project that municipal SSB excise taxes in these cities of $0.01/ounce will prevent 115,000  cases of childhood and adult obesity in 2025, prevent many new cases of diabetes, increase healthy life years and save more in future health care costs than the intervention costs to implement. Revenue from the tax can be used for education and health promotion efforts.   Implementing the tax could also serve as a powerful social signal to reduce sugar consumption.

Results prepared by the CHOICES project at the Harvard T.H. Chan School of Public Health: Gortmaker SL, Long MW, Ward ZJ, Giles CM, Barrett JL, Resch SC, Tao H, Cradock AL. Funded by The JPB Foundation and Healthy Food America. Results are those of the authors and not the funders. For further information contact choicesproject@hsph.harvard.edu. 

← Back to Resources

References

1. American Public Health Association. Taxes on Sugar-Sweetened Beverages. 2012.
2. Hakim D and Confessore N. Paterson seeks huge cuts and $1 billion in taxes and fees. The New York Times, Jan 19, 2010.
3. Falbe J, Rojas N, Grummon AH, Madsen KA. Higher Retail Prices of Sugar-Sweetened Beverages 3 Months After Implementation of an Excise Tax in Berkeley, California. Am J Public Health. 2015 Nov;105(11):2194-201.
4. Leonhardt D. The battle over taxing soda. The New York Times, May 19, 2010.
5. Wang YC, Bleich SN, and Gortmaker SL. Increasing caloric contribution from sugar-sweetened beverages and 100% fruit juices among US children and adolescents, 1988–2004. Pediatrics. 2008;121(6):e1604-e1614.
6. Bleich SN, Wang YC, Wang Y and Gortmaker SL. Increasing consumption of sugar-sweetened beverages among US adults: 1988–1994 to 1999—2004. Am J Clin Nutr. 2008;89(1):372-381.
7. Kit BK, Fakhouri TH, Park S, Nielsen SJ, Ogden CL. Trends in sugar-sweetened beverage consumption among youth and adults in the United States: 1999-2010. Am J Clin Nutr. 2013 Jul;98(1):180-8.
8. Malik VS, Pan A, Willett WC , Hu FB. Sugar-sweetened beverages and weight gain in children and adults: a systematic review and meta-analysis. Am J Clin Nutr. 2013;98(4):1084-1102.
9. Chen L, Caballero B, Mitchell DC, et al. Reducing consumption of sugar-sweetened beverages is associated with reduced blood pressure a prospective study among United States adults. Circulation. 2010;121(22):2398-2406.
10. S. Department of Health and Human Services and U.S. Department of Agriculture. 2015 – 2020 Dietary Guidelines for Americans. 8th Edition. December 2015. Available at http://health.gov/dietaryguidelines/2015/guidelines/.
11. Chaloupka FJ, Powell LM, and Chriqui JF. Sugar-sweetened beverage taxes and public health: A Research Brief. Minneapolis, MN: Robert Wood Johnson Foundation, Healthy Eating Research, 2009.
12. Brownell KD, Farley T, Willett WV, et al. The public health and economic benefits of taxing sugar-sweetened beverages. New Engl J Med. 2009;361(16):1599-1605.
13. 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.
14. Gortmaker SL, Wang YC, Long MW, Giles CM, Ward ZJ, Barrett JL, Kenney EL, Sonneville KR, Afzal AS, Resch SC, Cradock AL. Three Interventions That Reduce Childhood Obesity Are Projected To Save More Than They Cost To Implement. Health Aff (Millwood). 2015 Nov 1;34(11):1932-9.
15. Institute of Medicine. Local Government Actions to Prevent Childhood Obesity, 2009. National Academies Press: Washington, DC.
16. Colchero MA, Salgado JC, Unar-Munguía M, Molina M, Ng S, Rivera-Dommarco JA. Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas. PLoS ONE. 2015;10(12): e0144408.
17. Falbe J, Thompson HR, Becker CM, Rojas N, McCulloch CE, Madsen KA. Impact of the Berkeley Excise Tax on Sugar-Sweetened Beverage Consumption. Am J Public Health. 2016 Aug 23:e1-e7.
18. Ng SW, Silver L, Ryan-Ibarra S, Induni M, Hamma C, Poti J , Popkin B. Berkeley Evaluation of Soda Tax (BEST) Study Preliminary Findings. Presentation at the annual meeting of the American Public Health Association, Chicago, IL, November 2015.
19. Powell LM, Isgor z, Rimkus L, Chaloupka FJ. Sugar-sweetened beverage prices: Estimates from a national sample of food outlets. Chicago, IL: Bridging the Gap Program, Health Policy Center, Institute for Health Research and Policy, University of Illinois at Chicago, 2014. Available at: http://www.bridgingthegapresearch.org/_asset/ww9rpz/btg_SSB_price_brief_FINAL_Jan_2014.pdf.
20. UCONN Rudd Center. Revenue Calculator for Sugar-Sweetened Beverage Taxes. Jan 2014. Accessed March 2016, http://www.uconnruddcenter.org/revenue-calculator-for-sugar-sweetened-beverage-taxes.
21. Powell LM, Chriqui JF, Khan T, Wada R, Chaloupka FJ. Assessing the potential effectiveness of food and beverage taxes and subsidies for improving public health: a systematic review of prices, demand and body weight outcomes. Obes Rev. 2013;14(2): p. 110-28.
22. Chen L. Reduction in consumption of sugar-sweetened beverages is associated with weight loss: the PREMIER trial. Am J Clin Nutr. 2009;89(5):1299-306.
23. Mozaffarian D, Hao T, Rimm ER, Willett WC, Hu FB. Changes in diet and lifestyle and long-term weight gain in women and men. N Engl J Med. 2011;364(25): p. 2392-404.
24. Palmer JR, Boggs DA, Krishnan S, Hu FB, Singer M, Rosenberg L. Sugar-sweetened beverages and incidence of type 2 diabetes mellitus in African American women. Arch Intern Med. 2008;168(14): p. 1487-92.
25. Schulze MB, Mason JE, Ludwig D, et al. Sugar-sweetened beverages, weight gain, and incidence of type 2 diabetes in young and middle-aged women. JAMA. 2004;292(8): p. 927-34.
26. de Ruyter JC, Olthof MR, Seidell JC, Katan MB. A trial of sugar-free or sugar-sweetened beverages and body weight in Children. N Engl Med. 2012;367(15):1397-1406.
27. Ward ZJ, Long MW, Resch SC, Gortmaker SL, Cradock AL, Giles C, Hsiao A, Wang YC. Redrawing the US Obesity Landscape: Bias-Corrected Estimates of State-Specific Adult Obesity Prevalence. PLoS One. 2016 Mar 8;11(3):e0150735.
28. Long MW, Ward ZJ, Resch SC, Cradock AL, Wang YC, Giles CM, Gortmaker SL. State-level estimates of childhood obesity prevalence in the United States corrected for report bias. Int J Obes (Lond). 2016 Aug 30.
29. Imamura F, O’Connor L, Ye Z, Mursu J, Hayashino Y, Bhupathiraju SN, Forouhi NG. Consumption of sugar sweetened beverages, artificially sweetened beverages, and fruit juice and incidence of type 2 diabetes. Br J Sports Med. 2016 Apr;50(8):496-504.
30. Lynn J. (2016, Jan 20). City council votes to allocate ‘soda tax’ revenue to school district, city organizations. The Daily Californian. Retrieved from http://www.dailycal.org/2016/01/20/city-council-votes-allocate-soda-tax-revenue-school-district-city-organizations/.
31. Berkeley City Council. (2016, June 14). Berkeley City Council meeting. [Annotated Agenda]. Retrieved from https://www.cityofberkeley.info/Clerk/City_Council/2016/06_June/City_Council__06-14-2016_-_Meeting_Info.aspx.
32. Federal Trade Commission. Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation —A Report to Congress. Washington, DC: Federal Trade Commission, Bureau of Consumer Protection and Bureau of Economics, 2008. https://www.ftc.gov/sites/default/files/documents/reports/marketing-food-children-and-adolescents-review-industry-expenditures-activities-and-self-regulation/p064504foodmktingreport.pdf
33. Friedman R. Public Opinion Data, 2013: New Haven, CT: Yale Rudd Center for Food Policy & Obesity.
34. Frieden TR, Mostashari F, Kerker BD, Miller N, Hajat A, Frankel M. Adult tobacco use levels after intensive tobacco control measures: New York City, 2002-2003. Am J Public Health. 2005;95(6):1016-1023.

Appendix: City-specific results

Table 1: Baltimore, MD.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

 We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Baltimore, we estimated the $0.01/ounce SSB excise tax would lead to an 6% reduction in diabetes incidence- an estimated 303 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Baltimore could raise $25 million in the first year of implementation.

Table 2: Charlotte, NC.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Charlotte, we estimated the $0.01/ounce SSB excise tax would lead to an 8% reduction in diabetes incidence- an estimated 273 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Charlotte could raise $38 million in the first year of implementation.

Table 3: Columbus, OH.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Columbus, we estimated the $0.01/ounce SSB excise tax would lead to an 8% reduction in diabetes incidence- an estimated 396 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Columbus could raise $41 million in the first year of implementation.

Table 4: Denver, CO.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

 We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Denver, we estimated the $0.01/ounce SSB excise tax would lead to an 7% reduction in diabetes incidence- an estimated 169 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Denver could raise $29 million in the first year of implementation.

Table 5: Detroit, MI.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Detroit, we estimated the $0.01/ounce SSB excise tax would lead to an 7% reduction in diabetes incidence- an estimated 350 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Detroit could raise $34 million in the first year of implementation.

Table 6: Indianapolis, IN.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Indianapolis, we estimated the $0.01/ounce SSB excise tax would lead to an 8% reduction in diabetes incidence- an estimated 393 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Indianapolis could raise $41 million in the first year of implementation.

Table 7: Jacksonville, FL.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

 We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Jacksonville, we estimated the $0.01/ounce SSB excise tax would lead to an 7% reduction in diabetes incidence- an estimated 394 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Jacksonville could raise $39 million in the first year of implementation.

Table 8: Las Vegas, NV.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

 We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Las Vegas, we estimated the $0.01/ounce SSB excise tax would lead to an 6% reduction in diabetes incidence- an estimated 170 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes and calculations modeled off their calculator, ²⁰, a $0.01/ounce excise tax in Las Vegas could raise $25 million in the first year of implementation.

Table 9: Los Angeles, CA.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Los Angeles, we estimated the $0.01/ounce SSB excise tax would lead to an 4% reduction in diabetes incidence- an estimated 779 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Los Angles could raise $115 million in the first year of implementation.

Table 10: Louisville, KY.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Louisville, we estimated the $0.01/ounce SSB excise tax would lead to a 9% reduction in diabetes incidence- an estimated 448 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Louisville could raise $30 million in the first year of implementation.

Table 11: Oklahoma City, OK.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Oklahoma City, we estimated the $0.01/ounce SSB excise tax would lead to an 6% reduction in diabetes incidence- an estimated 197 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes and calculations modeled off their calculator, ²⁰, a $0.01/ounce excise tax in Oklahoma City could raise $26 million in the first year of implementation.

Table 12: Phoenix, AZ.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Phoenix, we estimated the $0.01/ounce SSB excise tax would lead to an 7% reduction in diabetes incidence- an estimated 496 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Phoenix could raise $69 million in the first year of implementation.

Table 13: San Diego, CA.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In San Diego, we estimated the $0.01/ounce SSB excise tax would lead to an 4% reduction in diabetes incidence- an estimated 241 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in San Diego could raise $40 million in the first year of implementation.

Table 14: San Jose, CA.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In San Jose, we estimated the $0.01/ounce SSB excise tax would lead to an 4% reduction in diabetes incidence- an estimated 164 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in San Jose could raise $29 million in the first year of implementation.

Table 15: Seattle, WA.

Estimates and 95% uncertainty intervals.

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Impact on Diabetes

We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption ²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Seattle, we estimated the $0.01/ounce SSB excise tax would lead to a 4% reduction in diabetes incidence- an estimated 97 cases of diabetes prevented- over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes, ²⁰, a $0.01/ounce excise tax in Seattle could raise $19 million in the first year of implementation.

The information in this brief is intended to provide educational information on the cost-effectiveness of SSB taxes.

Intervention Strategy Description

Implementation of a county tax of $0.01/ounce of sugar-sweetened beverages (SSBs) and diet drinks, administered by the county and based on proposals considered by federal, state, and local governments.^1-4

Background

SSBs include all beverages with added caloric sweeteners; diet drinks include any beverages with artificial sweeteners.  The modeled tax does not apply to 100% juice or milk products. Although SSB consumption has declined in recent years, children and adults in the U.S. consume twice as many calories from SSBs compared to 30 years ago.^5-7  Randomized trials and longitudinal studies have linked SSB consumption to excess weight gain, diabetes, and cardiovascular disease.  Consumption of SSBs increases the risk of chronic diseases through its impact on BMI and other mechanisms.^8,9  The Dietary Guidelines for Americans, 2015¹⁰ recommends that individuals reduce SSB intake to manage their body weight.  Drawing on the success of tobacco taxation and decades of economic research, public health experts have called for higher taxes on SSBs and documented their likely impact.^11-14  In 2009, the IOM recommended that local governments implement tax strategies to reduce consumption of “calorie-dense, nutrient-poor foods,” emphasizing SSBs as an apt target for taxation.¹⁵

Modeling Framework

Increased county tax linked to change in BMI through change in SSB price and consumption.

Impact of Tax on Price of SSBs to Consumers

We assume 100% pass through of the tax over the ten years. Empirical studies of SSB excise taxes in Mexico and France indicate that approximately the full amount of the excise tax is passed on to consumers.¹⁶ Short term studies for the local tax in Berkeley indicate less than complete pass-through.^3,17,18  The expected percent increase in SSB price was estimated based on the average $0.059/ounce reported in a review of beverage demand elasticity (inflated to $0.0612 in 2014 dollars).¹⁹  The price per ounce in this study  was based on a weighted average across stores, restaurants and other sources proportional to the source of consumed SSBs in NHANES 2009-2010.  The price per ounce of SSBs purchased in stores was calculated using weighted averages of two-liter bottles, 12-can cases, and single-serve bottles or cans based on the distribution of package sizes estimated from 2010 Nielsen Homescan data.  The $0.01/ounce tax would result in a 16.3% price increase.  We assumed that the tax rate would be adjusted annually for inflation to maintain the 16.3% price increase throughout the ten-year modeling time frame.

SSB Consumption and Price Elasticity of Demand

We used regionally-adjusted estimates of total SSB consumption in 2015 published in the UCONN Rudd Center Revenue Calculator for Sugar-Sweetened Beverage Taxes to adjust national age, sex, and race/ethnicity-specific consumption data from NHANES 2005-2010 to estimate current SSB consumption levels in Cook County.²⁰ Powell et al reviewed studies published 2007-2012 and estimated a mean own-price elasticity of demand for soft drinks (including regular and diet) of -0.86, ranging from -1.86 to -0.41.²¹ Recent research concerning the Berkeley tax indicates a 21% reduction in SSB intake among low income populations. ¹⁷

Direct effect of change in SSB consumption on change in BMI

We conducted evidence reviews for impact of change in SSB intake on BMI, taking into account any dietary compensation.¹⁴ Four large longitudinal studies in adults^22-25 of sufficient duration were identified.  The relationship was modeled using a uniform distribution based on the range of the estimates of the effect of a one serving reduction on BMI (from 0.21 to 0.57).  Among youth, a double-blind randomized controlled trial conducted over 18 months found that an additional 8 oz serving of SSBs led to a 1 kg greater weight gain.²⁶ We have no randomized controlled trials documenting impact of a reduction in diet drink intake. Diet drinks are non-caloric, so the model assumes no effect of reduction in diet beverage intake on change in BMI. 

Reach

The intervention reaches all youth and adults ages 2 years and older in Cook County.

Costs

The policy change will involve start up and ongoing labor costs for county tax department administrators.  To implement the intervention, the county government will need to process tax statements and conduct audits.  Businesses will also need to prepare tax statements and participate in audits, which will require labor from private tax accountants.  Cost information was drawn from states with planned or implemented excise taxes on soft drinks.¹⁴ The cost and benefit estimates do not include expected tax revenue.

CHOICES Microsimulation Model

The CHOICES microsimulation model for Cook County was used to calculate the costs and effectiveness over ten years (2015–25). This is a stochastic, discrete-time, individual-level microsimulation model designed to simulate the experience of the Cook County population from 2015 to 2025. Cases of obesity prevented were calculated at the end of the model in 2025. The model uses data from: US Census, American Community Survey, Behavioral Risk Factor Surveillance System²⁷, NHANES, National Survey of Children’s Health²⁸, the Medical Expenditure Panel Survey, and multiple national longitudinal studies. We calculated uncertainty intervals using Monte Carlo simulations programmed in Java over one thousand iterations of the model for a population of one million simulated individuals for a population of one million simulated individuals scaled to the county population size.¹⁴

Impact on Diabetes

 We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption²⁹  as well as local estimates of diabetes. On average, each 8.5 oz serving per day of SSBs increases the risk of diabetes by 18%. In Cook County, we estimated that the proposed SSB tax would lead to a 7% reduction in diabetes incidence and an estimated 2183 cases of diabetes prevented over a one-year period once the tax reaches its full effect. 

Expected Yearly SSB Tax Revenue

Based on calculations modeled from the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes,²⁰ we estimate a $0.01/ounce tax on sugar sweetened beverages in Cook County could raise approximately $250 million each year. This revenue estimate only includes sugar sweetened beverages, not diet beverages. Since diet beverages are consumed by adults at roughly half the rate of sugar sweetened beverages, the tax revenue will also be higher due to these consumption patterns.

Results

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Equity and Implementation Considerations

Concerns have been raised regarding the impact of the tax on households with low incomes. Because of the elasticity of -0.86, our analyses indicate that households will spend slightly less on SSBs after the tax goes into effect (about 0.2 percent less).  By taxing diet beverages, the policy change makes these non-caloric beverages more expensive, and hence should reduce the attractiveness of this option. In addition, revenue raised from an SSB tax can be reinvested in low income communities; for instance, in Berkeley, CA SSB tax revenue has been allocated for spending on school and community programs, several with a focus on low income or minority populations, to promote healthy eating, diabetes and obesity prevention.^30,31

There is opposition from the beverage industry, which spends over $4 billion/year nationwide on marketing.³²  Public support for such taxes generally increases with earmarking for prevention activities.³³  Relatively small beverage excise taxes are currently applied across many states.  The proposed tax is likely to be sustainable if implemented based on the history of tobacco excise taxes.  There is potential for a shift in social norms of SSB consumption based on evidence from tobacco control tax and regulatory efforts.³⁴

Discussion

We project that the proposed SSB tax policy will prevent thousands of cases of childhood and adult obesity, prevent new cases of diabetes, increase healthy life years and save more in future health care costs than it costs to implement.  Revenue from the tax can be used for education and health promotion efforts.   Implementing the tax could also serve as a powerful social signal to reduce sugar consumption.

Results prepared by the CHOICES project at the Harvard T.H. Chan School of Public Health: Gortmaker SL, Long MW, Ward ZJ, Giles CM, Barrett JL, Resch SC, Cradock AL. Funded by The JPB Foundation and Healthy Food America. Results are those of the authors and not the funders. For further information, contact choicesproject@hsph.harvard.edu. 

← Back to Resources

References

1. American Public Health Association. Taxes on Sugar-Sweetened Beverages. 2012.
2. Hakim D and Confessore N. Paterson seeks huge cuts and $1 billion in taxes and fees. The New York Times, Jan 19, 2010.
3. Falbe J, Rojas N, Grummon AH, Madsen KA. Higher Retail Prices of Sugar-Sweetened Beverages 3 Months After Implementation of an Excise Tax in Berkeley, California. Am J Public Health. 2015 Nov;105(11):2194-201.
4. Leonhardt D. The battle over taxing soda. The New York Times, May 19, 2010.
5. Wang YC, Bleich SN and Gortmaker SL. Increasing caloric contribution from sugar-sweetened beverages and 100% fruit juices among US children and adolescents, 1988–2004. Pediatrics. 2008;121(6):e1604-e1614.
6. Bleich SN, Wang YC, Wang Y and Gortmaker SL. Increasing consumption of sugar-sweetened beverages among US adults: 1988–1994 to 1999—2004. Am J Clin Nutr. 2008;89(1):372-381.
7. Kit BK, Fakhouri TH, Park S, Nielsen SJ, Ogden CL. Trends in sugar-sweetened beverage consumption among youth and adults in the United States: 1999-2010. Am J Clin Nutr. 2013 Jul;98(1):180-8.
8. Malik VS, Pan A, Willett WC , Hu FB. Sugar-sweetened beverages and weight gain in children and adults: a systematic review and meta-analysis. Am J Clin Nutr. 2013;98(4):1084-1102.
9. Chen L, Caballero B, Mitchell DC, et al. Reducing consumption of sugar-sweetened beverages is associated with reduced blood pressure a prospective study among United States adults. Circulation. 2010;121(22):2398-2406.
10. S. Department of Health and Human Services and U.S. Department of Agriculture. 2015 – 2020 Dietary Guidelines for Americans. 8th Edition. December 2015. Available at http://health.gov/dietaryguidelines/2015/guidelines/.
11. Chaloupka FJ, Powell LM, and Chriqui JF. Sugar-sweetened beverage taxes and public health: A Research Brief. Minneapolis, MN: Robert Wood Johnson Foundation, Healthy Eating Research, 2009.
12. Brownell KD, Farley T, Willett WV, et al. The public health and economic benefits of taxing sugar-sweetened beverages. New Engl J Med, 2009;361(16):1599-1605.
13. 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
14. Gortmaker SL, Wang YC, Long MW, Giles CM, Ward ZJ, Barrett JL, Kenney EL, Sonneville KR, Afzal AS, Resch SC, Cradock AL. Three Interventions That Reduce Childhood Obesity Are Projected To Save More Than They Cost To Implement. Health Aff (Millwood). 2015 Nov 1;34(11):1932-9.
15. Institute of Medicine. Local Government Actions to Prevent Childhood Obesity, 2009. National Academies Press: Washington, DC.
16. Colchero MA, Salgado JC, Unar-Munguía M, Molina M, Ng S, Rivera-Dommarco JA. Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas. PLoS ONE. 2015;10(12): e0144408.
17. Falbe J, Thompson HR, Becker CM, Rojas N, McCulloch CE, Madsen KA. Impact of the Berkeley Excise Tax on Sugar-Sweetened Beverage Consumption. Am J Public Health. 2016 Aug 23:e1-e7.
18. Ng SW, Silver L, Ryan-Ibarra S, Induni M, Hamma C, Poti J , Popkin B. Berkeley Evaluation of Soda Tax (BEST) Study Preliminary Findings. Presentation at the annual meeting of the American Public Health Association, Chicago, IL, November 2015.
19. Powell LM, Isgor z, Rimkus L, Chaloupka FJ. Sugar-sweetened beverage prices: Estimates from a national sample of food outlets. Chicago, IL: Bridging the Gap Program, Health Policy Center, Institute for Health Research and Policy, University of Illinois at Chicago, 2014. Available at: http://www.bridgingthegapresearch.org/_asset/ww9rpz/btg_SSB_price_brief_FINAL_Jan_2014.pdf.
20. UCONN Rudd Center. Revenue Calculator for Sugar-Sweetened Beverage Taxes. Jan 2014. Accessed March 2016, http://www.uconnruddcenter.org/revenue-calculator-for-sugar-sweetened-beverage-taxes
21. Powell LM, Chriqui JF, Khan T, Wada R, Chaloupka FJ. Assessing the potential effectiveness of food and beverage taxes and subsidies for improving public health: a systematic review of prices, demand and body weight outcomes. Obes Rev. 2013;14(2): p. 110-28.
22. Chen L. Reduction in consumption of sugar-sweetened beverages is associated with weight loss: the PREMIER trial. Am J Clin Nutr. 2009;89(5):1299-306.
23. Mozaffarian D, Hao T, Rimm ER, Willett WC, Hu FB. Changes in diet and lifestyle and long-term weight gain in women and men. N Engl J Med. 2011;364(25): p. 2392-404.
24. Palmer JR, Boggs DA, Krishnan S, Hu FB, Singer M, Rosenberg L. Sugar-sweetened beverages and incidence of type 2 diabetes mellitus in African American women. Arch Intern Med. 2008;168(14): p. 1487-92.
25. Schulze MB, Mason JE, Ludwig D, et al. Sugar-sweetened beverages, weight gain, and incidence of type 2 diabetes in young and middle-aged women. JAMA. 2004;292(8): p. 927-34.
26. de Ruyter JC, Olthof MR, Seidell JC, Katan MB. A trial of sugar-free or sugar-sweetened beverages and body weight in Children. N Engl Med. 2012;367(15):1397-1406.
27. Ward ZJ, Long MW, Resch SC, Gortmaker SL, Cradock AL, Giles C, Hsiao A, Wang YC. Redrawing the US Obesity Landscape: Bias-Corrected Estimates of State-Specific Adult Obesity Prevalence. PLoS One. 2016 Mar 8;11(3):e0150735.
28. Long MW, Ward ZJ, Resch SC, Cradock AL, Wang YC, Giles CM, Gortmaker SL. State-level estimates of childhood obesity prevalence in the United States corrected for report bias. Int J Obes (Lond). 2016 Aug 30.
29. Imamura F, O’Connor L, Ye Z, Mursu J, Hayashino Y, Bhupathiraju SN, Forouhi NG. Consumption of sugar sweetened beverages, artificially sweetened beverages, and fruit juice and incidence of type 2 diabetes. Br J Sports Med. 2016 Apr;50(8):496-504.
30. Lynn J. (2016, Jan 20). City council votes to allocate ‘soda tax’ revenue to school district, city organizations. The Daily Californian. Retrieved from http://www.dailycal.org/2016/01/20/city-council-votes-allocate-soda-tax-revenue-school-district-city-organizations/.
31. Berkeley City Council. (2016, June 14). Berkeley City Council meeting. [Annotated Agenda]. Retrieved from https://www.cityofberkeley.info/Clerk/City_Council/2016/06_June/City_Council__06-14-2016_-_Meeting_Info.aspx.
32. Federal Trade Commission. Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation —A Report to Congress. Washington, DC: Federal Trade Commission, Bureau of Consumer Protection and Bureau of Economics, 2008. https://www.ftc.gov/sites/default/files/documents/reports/marketing-food-children-and-adolescents-review-industry-expenditures-activities-and-self-regulation/p064504foodmktingreport.pdf
33. Friedman R. Public Opinion Data, 2013: New Haven, CT: Yale Rudd Center for Food Policy & Obesity.
34. Frieden TR, Mostashari F, Kerker BD, Miller N, Hajat A, Frankel M. Adult tobacco use levels after intensive tobacco control measures: New York City, 2002-2003. Am J Public Health. 2005;95(6):1016-1023.

The information in this brief is intended to provide educational information on the cost effectiveness of SSB taxes.

Intervention Strategy Description

Implementation of a city excise tax of $0.01/ounce of sugar-sweetened beverages (SSBs), administered by the city department of revenue and based on proposals considered by federal, state, and local governments.^1-4

Background

SSBs include all beverages with added caloric sweeteners.  The modeled excise tax does not apply to 100% juice, milk products, or artificially-sweetened beverages. Although SSB consumption has declined in recent years, children and adults in the U.S. consume twice as many calories from SSBs compared to 30 years ago.^5-7  Randomized trials and longitudinal studies have linked SSB consumption to excess weight gain, diabetes, and cardiovascular disease.  Consumption of SSBs increases the risk of chronic diseases through its impact on BMI and other mechanisms.^8,9  The Dietary Guidelines for Americans, 2015¹⁰ recommends that individuals reduce SSB intake in order to manage their body weight.  Drawing on the success of tobacco taxation and decades of economic research, public health experts have called for higher taxes on SSBs and documented their likely impact.^11-14  In 2009, the IOM recommended that local governments implement tax strategies to reduce consumption of “calorie-dense, nutrient-poor foods,” emphasizing SSBs as an apt target for taxation.¹⁵

Modeling Framework

Increased city excise tax linked to change in BMI through change in SSB price and consumption.  

Impact of Tax on Price to Consumers

We assume 100% pass through of the tax over the ten years. Empirical studies in Mexico and France indicate that approximately the full amount of the excise tax is passed on to consumers. ¹⁶  Short term studies for the local tax in Berkeley indicate less than complete pass-through. ^3,17,18 The expected percent increase in SSB price was estimated based on the average $0.059/ounce reported in a review of beverage demand elasticity (inflated to $0.0612 in 2014 dollars).¹⁹  The price per ounce in this study  was based on a weighted average across stores, restaurants and other sources proportional to the source of consumed SSBs in NHANES 2009-2010.  The price per ounce of SSBs purchased in stores was calculated using weighted averages of two-liter bottles, 12-can cases, and single-serve bottles or cans based on the distribution of package sizes estimated from 2010 Nielsen Homescan data.  The $0.01/ounce excise tax would result in a 16.3% price increase.  We assumed that the tax rate would be adjusted annually for inflation to maintain the 16.3% price increase throughout the ten-year modeling time frame.

SSB Consumption and Price Elasticity of Demand

We used regionally-adjusted estimates of total SSB consumption in 2015 published in the UCONN Rudd Center Revenue Calculator for Sugar-Sweetened Beverage Taxes to adjust national age, sex, and race/ethnicity-specific consumption data from NHANES 2005-2010 to estimate current SSB consumption levels in Albany.²⁰ Powell et al reviewed studies published 2007-2012 and estimated a mean own-price elasticity of demand for SSBs weighted by SSB category consumption shares of -1.21, ranging from -3.87 to -0.69. ²¹ Recent research concerning the Berkeley tax indicates a 21% reduction in SSB intake among low income populations. ¹⁷

Direct effect of change in SSB consumption on change in BMI

We conducted evidence reviews for impact of change in SSB intake on BMI, taking into account any dietary compensation.¹⁴ Four large longitudinal studies in adults^22-25 of sufficient duration were identified.  The relationship was modeled using a uniform distribution based on the range of the estimates of the effect of a one serving reduction on BMI (from 0.21 to 0.57).  Among youth, a double-blind randomized controlled trial conducted over 18 months found that an additional 8 oz serving of SSBs led to a 1 kg greater weight gain.²⁶

Reach

The intervention reaches all youth and adults ages 2 years and older in Albany.

Costs

The policy change will involve start up and ongoing labor costs for municipal tax department administrators.  To implement the intervention, the municipal government will need to process tax statements and conduct audits.  Businesses will also need to prepare tax statements and participate in audits, which will require labor from private tax accountants.  Cost information was drawn from states with planned or implemented excise taxes on soft drinks.¹⁴ The cost and benefit estimates do not include expected tax revenue.

CHOICES Microsimulation Model

The CHOICES microsimulation model for Albany was used to calculate the costs and effectiveness over ten years (2015–25). This is a stochastic, discrete-time, individual-level microsimulation model designed to simulate the experience of the Albany population from 2015 to 2025. Cases of obesity prevented were calculated at the end of the model in 2025. The model uses data from: US Census, American Community Survey, Behavioral Risk Factor Surveillance System, ²⁷ NHANES, National Survey of Children’s Health, ²⁸ the Medical Expenditure Panel Survey, and multiple national longitudinal studies. We calculated uncertainty intervals using Monte Carlo simulations programmed in Java over one thousand iterations of the model for a population of simulated individuals representing the city population size.¹⁴

Impact on Diabetes

 We estimated the impact of the tax-induced reduction in SSB intake on diabetes incidence for adults ages 18-79 years using a published meta-analysis of the relative risk of developing diabetes due to a one-serving change in SSB consumption²⁹ as well as local estimates of diabetes. On average, each 8.5 oz serving of SSBs per day increases the risk of diabetes by 18%. In Albany, we estimated that the proposed SSB excise tax would lead to a 3% reduction in diabetes incidence – an estimated 3 cases of diabetes prevented – over a one-year period once the tax reaches its full effect.

Expected Yearly SSB Tax Revenue

Based on calculations modeled from the Rudd Center Revenue Calculator for Sugar Sweetened Beverage Taxes,²⁰ we estimate a $0.01/ounce excise tax in Albany could raise approximately $560,000 each year. 

Results

All metrics reported for the population over a 10-year period and discounted at 3% per year, unless otherwise noted.
*Not discounted.

Equity and Implementation Considerations

Concerns have been raised regarding the impact of the tax on households with low incomes. Because of the elasticity of -1.21, our analyses clearly indicate that households will spend less on SSBs after the tax goes into effect, providing disposable income for other purchases. In addition, we project that greater health benefits will accrue to low-income consumers who on average consume more SSBs than higher income consumers; the same is true for a number of racial and ethnic groups. Disparities in obesity outcomes should thus decrease following implementation of the proposed tax. In addition, revenue raised from an SSB tax can be reinvested in low income communities; for instance, in Berkeley, CA SSB tax revenue has been allocated for spending on school and community programs, several with a focus on low income or minority populations, to promote healthy eating, diabetes and obesity prevention. ^30,31

There is opposition from the beverage industry, which spends over $4 billion/year nationwide on marketing.³²  Public support for such taxes generally increases with earmarking for prevention activities.³³  Relatively small beverage excise taxes are currently applied across many states.  The proposed tax is likely to be sustainable if implemented based on the history of tobacco excise taxes.  There is potential for a shift in social norms of SSB consumption based on evidence from tobacco control tax and regulatory efforts.³⁴

Discussion

We project that the proposed SSB excise tax policy will prevent almost one hundred cases of childhood and adult obesity, prevent new cases of diabetes, increase healthy life years and save more in future health care costs than it costs to implement. Revenue from the tax can be used for education and health promotion efforts.   Implementing the tax could also serve as a powerful social signal to reduce sugar consumption.

Results prepared by the CHOICES project at the Harvard T.H. Chan School of Public Health: Gortmaker SL, Long MW, Ward ZJ, Giles CM, Barrett JL, Resch SC, Cradock AL. Funded by The JPB Foundation and Healthy Food America. Results are those of the authors and not the funders. For further information, contact choicesproject@hsph.harvard.edu. 

← Back to Resources

References

1. American Public Health Association. Taxes on Sugar-Sweetened Beverages. 2012.
2. Hakim D and Confessore N. Paterson seeks huge cuts and $1 billion in taxes and fees. The New York Times, Jan 19, 2010.
3. Falbe J, Rojas N, Grummon AH, Madsen KA. Higher Retail Prices of Sugar-Sweetened Beverages 3 Months After Implementation of an Excise Tax in Berkeley, California. Am J Public Health. 2015 Nov;105(11):2194-201.
4. Leonhardt D. The battle over taxing soda. The New York Times, May 19, 2010.
5. Wang YC, Bleich SN, and Gortmaker SL. Increasing caloric contribution from sugar-sweetened beverages and 100% fruit juices among US children and adolescents, 1988–2004. Pediatrics. 2008;121(6):e1604-e1614.
6. Bleich SN, Wang YC, Wang Y and Gortmaker SL. Increasing consumption of sugar-sweetened beverages among US adults: 1988–1994 to 1999—2004. Am J Clin Nutr. 2008;89(1):372-381.
7. Kit BK, Fakhouri TH, Park S, Nielsen SJ, Ogden CL. Trends in sugar-sweetened beverage consumption among youth and adults in the United States: 1999-2010. Am J Clin Nutr. 2013 Jul;98(1):180-8.
8. Malik VS, Pan A, Willett WC , Hu FB. Sugar-sweetened beverages and weight gain in children and adults: a systematic review and meta-analysis. Am J Clin Nutr. 2013;98(4):1084-1102.
9. Chen L, Caballero B, Mitchell DC, et al. Reducing consumption of sugar-sweetened beverages is associated with reduced blood pressure a prospective study among United States adults. Circulation. 2010;121(22):2398-2406.
10. S. Department of Health and Human Services and U.S. Department of Agriculture. 2015 – 2020 Dietary Guidelines for Americans. 8th Edition. December 2015. Available at http://health.gov/dietaryguidelines/2015/guidelines/.
11. Chaloupka FJ, Powell LM, and Chriqui JF. Sugar-sweetened beverage taxes and public health: A Research Brief. Minneapolis, MN: Robert Wood Johnson Foundation, Healthy Eating Research, 2009.
12. Brownell KD, Farley T, Willett WV, et al. The public health and economic benefits of taxing sugar-sweetened beverages. New Engl J Med. 2009;361(16):1599-1605.
13. 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.
14. Gortmaker SL, Wang YC, Long MW, Giles CM, Ward ZJ, Barrett JL, Kenney EL, Sonneville KR, Afzal AS, Resch SC, Cradock AL. Three Interventions That Reduce Childhood Obesity Are Projected To Save More Than They Cost To Implement. Health Aff (Millwood). 2015 Nov 1;34(11):1932-9.
15. Institute of Medicine. Local Government Actions to Prevent Childhood Obesity, 2009. National Academies Press: Washington, DC.
16. Colchero MA, Salgado JC, Unar-Munguía M, Molina M, Ng S, Rivera-Dommarco JA. Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas. PLoS ONE. 2015;10(12): e0144408.
17. Falbe J, Thompson HR, Becker CM, Rojas N, McCulloch CE, Madsen KA. Impact of the Berkeley Excise Tax on Sugar-Sweetened Beverage Consumption. Am J Public Health. 2016 Aug 23:e1-e7.
18. Ng SW, Silver L, Ryan-Ibarra S, Induni M, Hamma C, Poti J , Popkin B. Berkeley Evaluation of Soda Tax (BEST) Study Preliminary Findings. Presentation at the annual meeting of the American Public Health Association, Chicago, IL, November
19. Powell LM, Isgor z, Rimkus L, Chaloupka FJ. Sugar-sweetened beverage prices: Estimates from a national sample of food outlets. Chicago, IL: Bridging the Gap Program, Health Policy Center, Institute for Health Research and Policy, University of Illinois at Chicago, 2014. Available at: http://www.bridgingthegapresearch.org/_asset/ww9rpz/btg_SSB_price_brief_FINAL_Jan_2014.pdf.
20. UCONN Rudd Center. Revenue Calculator for Sugar-Sweetened Beverage Taxes. Jan 2014. Accessed March 2016, http://www.uconnruddcenter.org/revenue-calculator-for-sugar-sweetened-beverage-taxes.
21. Powell LM, Chriqui JF, Khan T, Wada R, Chaloupka FJ. Assessing the potential effectiveness of food and beverage taxes and subsidies for improving public health: a systematic review of prices, demand and body weight outcomes. Obes Rev. 2013;14(2): p. 110-28.
22. Chen L. Reduction in consumption of sugar-sweetened beverages is associated with weight loss: the PREMIER trial. Am J Clin Nutr. 2009;89(5):1299-306.
23. Mozaffarian D, Hao T, Rimm ER, Willett WC, Hu FB. Changes in diet and lifestyle and long-term weight gain in women and men. N Engl J Med. 2011;364(25): p. 2392-404.
24. Palmer JR, Boggs DA, Krishnan S, Hu FB, Singer M, Rosenberg L. Sugar-sweetened beverages and incidence of type 2 diabetes mellitus in African American women. Arch Intern Med. 2008;168(14): p. 1487-92.
25. Schulze MB, Mason JE, Ludwig D, et al. Sugar-sweetened beverages, weight gain, and incidence of type 2 diabetes in young and middle-aged women. JAMA. 2004;292(8): p. 927-34.
26. de Ruyter JC, Olthof MR, Seidell JC, Katan MB. A trial of sugar-free or sugar-sweetened beverages and body weight in Children. N Engl Med. 2012;367(15):1397-1406.
27. Ward ZJ, Long MW, Resch SC, Gortmaker SL, Cradock AL, Giles C, Hsiao A, Wang YC. Redrawing the US Obesity Landscape: Bias-Corrected Estimates of State-Specific Adult Obesity Prevalence. PLoS One. 2016 Mar 8;11(3):e0150735.
28. Long MW, Ward ZJ, Resch SC, Cradock AL, Wang YC, Giles CM, Gortmaker SL. State-level estimates of childhood obesity prevalence in the United States corrected for report bias. Int J Obes (Lond). 2016 Aug 30.
29. Imamura F, O’Connor L, Ye Z, Mursu J, Hayashino Y, Bhupathiraju SN, Forouhi NG. Consumption of sugar sweetened beverages, artificially sweetened beverages, and fruit juice and incidence of type 2 diabetes. Br J Sports Med. 2016 Apr;50(8):496-504.
30. Lynn J. (2016, Jan 20). City council votes to allocate ‘soda tax’ revenue to school district, city organizations. The Daily Californian. Retrieved from http://www.dailycal.org/2016/01/20/city-council-votes-allocate-soda-tax-revenue-school-district-city-organizations/.
31. Berkeley City Council. (2016, June 14). Berkeley City Council meeting. [Annotated Agenda]. Retrieved from https://www.cityofberkeley.info/Clerk/City_Council/2016/06_June/City_Council__06-14-2016_-_Meeting_Info.aspx.
32. Federal Trade Commission. Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation —A Report to Congress. Washington, DC: Federal Trade Commission, Bureau of Consumer Protection and Bureau of Economics, 2008. https://www.ftc.gov/sites/default/files/documents/reports/marketing-food-children-and-adolescents-review-industry-expenditures-activities-and-self-regulation/p064504foodmktingreport.pdf
33. Friedman R. Public Opinion Data, 2013: New Haven, CT: Yale Rudd Center for Food Policy & Obesity.
34. Frieden TR, Mostashari F, Kerker BD, Miller N, Hajat A, Frankel M. Adult tobacco use levels after intensive tobacco control measures: New York City, 2002-2003. Am J Public Health. 2005;95(6):1016-1023.