Setting: Communities & Government

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

Executive Summary

Continually rising rates of obesity represent one of the greatest public health threats facing the United States. Obesity has been linked to excess consumption of sugary drinks. Federal, state, and local governments have considered implementing excise taxes on sugary drinks to reduce consumption, reduce obesity and provide a new source of government revenue.^1-4

We modeled implementation of a city excise tax, a tax on sugary drinks only, at a tax rate of $0.02/ounce.

The tax model was projected to be cost-saving and resulted in lower levels of sugary drink consumption, thousands of cases of obesity prevented, and hundreds of millions of dollars in health care cost savings. Health care cost savings per dollar invested was $11 in the model.

Background 

Although sugary drink consumption has declined in recent years, adolescents and young adults in the United States consume more sugar than the Dietary Guidelines for Americans 2015-2020 recommends, with persistent racial/ethnic disparities.^5-9 According to recent estimates, 26% of adults and 21% of youth in Denver drink at least one soda or other sugary drink per day.^10,11 Public health researchers have suggested that excess intake of sugary drinks may be one of the single largest drivers of the obesity epidemic in the U.S.¹² An estimated 57% of adults and nearly 30% of children ages 2-17 in Denver have overweight or obesity.^10,13

Targeted marketing contributes to differences in consumption by race/ethnicity group. Black youth are twice as likely to see TV ads for sugary drinks as White non-Hispanic youth.¹⁴ Hispanic and Black youth are a target growth market for sugary drinks. On the other hand, Black and Hispanic youth are less likely to be the audience for company marketing of more healthy beverage alternatives, like water.¹⁵ Consumption of sugary drinks increases the risk of chronic diseases through changes in body mass index (BMI), insulin regulation, and other metabolic processes.^16-18 Randomized intervention trials and longitudinal studies have linked increases in sugary drink consumption to excess weight gain, diabetes, cardiovascular disease, and other health risks.^16,17 There are persistent racial and ethnic disparities across both sugary drink consumption levels and rates of obesity and chronic disease.^5-8 In light of this evidence, the Dietary Guidelines for Americans 2015-2020⁹ recommends that individuals limit sugary drink intake in order to manage body weight and reduce risk of chronic disease.

Taxation has emerged as one recommended strategy to reduce consumption of sugary drinks.^12,19 This strategy has been studied by public health experts, who have drawn on the success of tobacco taxation and decades of economic research to model the estimated financial and health impact of an sugary drink excise tax.^20-23 Sugary drinks include all drinks with added caloric sweeteners. Proposed and enacted sugary drink excise taxes typically do not apply to 100% juice or milk products. This report aims to model the projected effect of sugary drink excise taxes on health and disease outcomes over the next decade.

Modeling Framework: How excise taxes can lead to better health

Increased local excise tax is linked to change in BMI through change in sugary drink price and consumption

How does increasing the price of sugary drinks change individual sugary drink consumption?

Since the cost of a sugary drink excise tax is incorporated directly into the beverage’s sticker price, an excise tax will likely influence consumer purchasing decisions more than a comparable sales tax that is added onto the item at the register. We assume 100% pass-through of the tax over 10 years and assume the tax rate would be adjusted annually for inflation. Our pass-through rate estimate is supported by empirical studies of excise taxes in Mexico and France that demonstrate near-complete pass through rates to consumers.²⁴ Short term studies for the local tax in Berkeley indicate imperfect, or less than 100%, pass-through.^3,25,26 The expected change in sugary drink price was estimated using an average of $0.06/ounce based on national sugary drink prices.²⁷ The price per ounce in this study was based on a weighted average of sugary drink consumption across stores, restaurants and other sources according to the estimates from the National Health and Nutrition Examination Survey (NHANES) 2009-2010. The price per ounce of sugary drinks purchased in stores was calculated using weighted averages of two-liter bottles, 12-can cases, and single-serve containers based on 2010 Nielsen Homescan data.²⁷ For example, a $0.02/ounce tax would raise the price of a 12-ounce can of soda from $0.72 to $0.96/can post-tax.

How does an excise tax on distributors affect the price paid by consumers?

We used local age and race/ethnicity specific estimates of adult sugary drink consumption from the Colorado Behavioral Risk Factor Surveillance System¹⁰ and youth sugary drink consumption from the Healthy Kids Colorado Survey²⁸ to adjust national estimates of sugary drink consumption from NHANES 2011-2014 to estimate current sugary drink consumption levels in Denver. The mean own-price elasticity of demand for sugar-sweetened soft drinks (not including diet) is -1.21.²⁹ Recent research on the Berkeley tax indicating a 21% reduction in sugary drink intake among low income populations supports this estimate.²⁵

What are the individual health effects of decreasing sugary drink consumption?

Research has shown that decreasing sugary drink consumption can have positive effects on health in adults and youth. We conducted evidence reviews for the impact of a change in sugary drink intake on BMI, accounting for dietary compensation.²³ Four large, multi-year longitudinal studies in adults^17,30-32 were identified. The relationship was modeled using a uniform distribution based on the range of estimated effects on BMI due to reducing sugary drink intake; a one-serving reduction was associated with a BMI decrease of 0.57 in adults. Among youth, a double-blind randomized controlled trial conducted over 18 months found that an additional 8 ounce serving of sugary drinks led to a 2.2 lbs greater weight gain.³³

Reach

The intervention applies to all youth and adults in Denver. However, the model only looks at the effects on those 2 years of age and older.*

*BMI z-scores were used in our analyses, which are not defined for children under 2 years of age.

Cost

We assume the tax will incur start up and ongoing labor costs for tax administrators in the Denver Department of Finance. To implement the intervention, the Denver Department of Finance would need to process tax statements and conduct audits. Businesses would also need to prepare tax statements and participate in audits, which would require labor from private tax accountants. Cost information was drawn from localities with planned or implemented excise taxes on soft drinks.^22,23 The cost and benefit estimates do not include expected tax revenue.

CHOICES Microsimulation Model

The CHOICES microsimulation model for Denver was used to calculate the costs and effectiveness over 10 years (2017–27). Cases of obesity prevented were calculated at the end of the model period in 2027. The model was based on prior CHOICES work^23,34, and created a virtual population of Denver residents using data from: U.S. Census, American Community Survey, Behavioral Risk Factor Surveillance System^10,16, NHANES, National Survey of Children’s Health³⁵, the Medical Expenditure Panel Survey, multiple national longitudinal studies, and obesity prevalence data provided by Denver Public Health and Denver Health and Hospital Authority. Using peer-reviewed methodology, we forecasted what would happen to this virtual population with and without a sugary drink tax to model changes in disease and mortality rates, and health care costs due to the tax.

Results: ^$0.02/ounce City Excise Tax on Sugary Drinks

Overall, the model shows that a sugary drink excise tax is cost-saving. Compared to the simulated natural history without a tax, the tax is projected to result in lower levels of sugary drink consumption, fewer cases of obesity, fewer deaths, and health care savings greater than $33 million dollars over the 10-year period under consideration.

The estimated reduction in obesity attributable to the tax leads to lower projected health care costs, offsetting tax implementation costs and resulting in net cost savings. The difference between total health care costs with no intervention and lower health care costs with an intervention represent health care costs saved; these savings can be compared to the cost of implementing the tax to arrive at the metric of health care costs saved per $1 invested.

Uncertainty intervals are estimated by running the model 1,000 times, taking into account both uncertainty from data sources and virtual population projections, and calculating a central range in which 95 percent of the model results fell.

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

*Not discounted.

There are differences in sugary drink consumption and obesity prevalence by race/ethnicity in Denver. The CHOICES model used local data to build a virtual Denver population. Without any intervention:

Sugary drink consumption is highest in the Hispanic population

Obesity prevalence is highest in the Non-Hispanic Black and Hispanic populations

Results: ^$0.02/ounce City Excise Tax on Sugary Drinks by Race/Ethnicity Groups

Uncertainty intervals are estimated by running the model 1,000 times, taking into account both uncertainty from data sources and virtual population projections, and calculating a central range in which 95 percent of the model results fell.

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

*Not discounted.

Communities of color make up:

A ^$0.02/ounce excise tax on sugary drinks is projected to have a greater health impact on Non-Hispanic Black and Hispanic communities in Denver

Impact on Diabetes

We estimated the impact of the tax-induced reduction in sugary drink 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 sugary drink consumption³⁶ as well as local estimates of diabetes. On average, each 8.5 ounce serving of sugary drinks per day increases the risk of diabetes by 18%.³⁶

In Denver, we estimated that the proposed sugary drink excise tax would lead to a 7% reduction in diabetes incidence in the sugary drink tax model. Impact on diabetes incidence was calculated over a one-year period once the tax reaches its full effect. Impact on diabetes was calculated based on summary results from the model, not directly via microsimulation.

Impact on Tooth Decay

We estimated the impact of a sugary drink excise tax on tooth decay cost using a longitudinal analysis of the relationship between intake of sugars and tooth decay in adults. On average, for every 10 grams higher intake of sugar per day, there is an increase in decayed, missing and filled teeth (DMFT) of approximately 0.10 over 10 years.³⁷ As described above, we assume that the excise tax will result in a reduction in sugary drink intake. There are many studies showing a similar relationship between higher intake of sugars and tooth decay in children and youth³⁸ and thus we assume the same relationship as found in adults.

We used 2018 Health First Colorado Dental Fee Schedule³⁹ data to estimate a Medicaid cost of treating DMFT as: $232.28 for a permanent crown and $83.59 for a filling. These codes reflect treatment for one surface and do not reflect higher reimbursement rates for multi-surface treatment, temporary crowns, or potential flat tax schedules. Based on analysis of data on tooth decay, fillings and crowns for the U.S. population from NHANES 1988-1994 (the last year crowns and fillings were separately reported)⁴⁰, we estimate that 78.9% of tooth decay in children and 43.5% of tooth decay in adults is treated. Using this same data set, we estimate that 97.5% of treatment for children is fillings and 82.5% of treatment for adults is fillings.

To estimate Medicaid-specific dental caries cost savings, we used local estimates of the numbers of people enrolled in Medicaid and the proportion receiving Medicaid dental services. Because of limited Medicaid dental coverage for adults in Denver, only children are included in the Medicaid-specific calculations. In Denver, we estimated that a $0.02/ounce tax would lead to a total DMFT savings of $882,000 in Medicaid savings over a period of 10 years. The Medicaid reimbursement tax estimates may underestimate the total cost savings of tooth decay treatment projected here as dental providers may charge higher amounts to patients.

Considerations for Health Equity

Concerns have been raised regarding the impact of the tax on households with low income households. For many goods, including cigarettes, low-income households are more price-sensitive than high-income peers. If this is also true for low-income sugary drink consumers, these households would spend less on sugary drinks after the tax goes into effect, which would free up disposable income for other consumer purchases.⁴¹ Using sales data from the Rudd Center Sugary Beverage calculator⁴², we project that individuals and households in Denver will spend less money on sugary drinks after the tax.

In addition, low-income consumers on average consume more sugary drinks than higher income consumers. We therefore project that greater health benefits from this policy will accrue to these consumers; the same is true for a number of racial and ethnic groups (see pages 9-10). Using data from NHANES and Denver on sugary drink consumption in the CHOICES model, the average daily consumption of sugary drinks by people in Denver varies by racial and ethnic group (see page 8). Under the proposed tax, Hispanic Denver residents are projected to experience a fourfold reduction in obesity prevalence compared to White non-Hispanic Denver residents. Similarly, the reduction in obesity prevalence among Black non-Hispanic Denver is projected to be almost twice as high as the reduction among White non-Hispanic Denver residents. On that basis, the proposed tax should tend to decrease disparities in obesity outcomes.

Implementation Considerations

Revenue raised from a sugary drink tax can be reinvested in low-income communities. For instance, in Berkeley, CA, sugary drink tax revenue has been allocated for spending on school and community programs to promote healthy eating, diabetes and obesity prevention; many serve low-income or minority populations.^43,44 Public support for such taxes generally increases with earmarking for preventive health activities.⁴⁴

There is opposition from the food and beverage industry, which spends billions of dollars promoting their products.⁴⁵ Relatively small beverage excise taxes are currently applied across many states. The proposed tax is likely to be sustainable if implemented based on the successful history of tobacco excise taxes. There is potential for a shift in social norms of sugary drink consumption based on evidence from tobacco control tax and regulatory efforts.⁴⁶ This shift in norms can be facilitated by taxing sugary beverages, which increases the attractiveness of non-caloric beverages options and discourages consumers from selecting any soft drink options when making beverage decisions.

Conclusion

We project that a tax policy in Denver 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.

Citation

Moreland J, Kraus (McCormick) E, Long MW, Ward ZJ, Giles CM, Barrett JL, Cradock AL, Resch SC, Greatsinger A, Tao H, Flax CN, and Gortmaker SL. Denver: Sugary Drink Excise Tax. The CHOICES Learning Collaborative Partnership at the Harvard T.H. Chan School of Public Health, Boston, MA; December 2018.

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

Funding

This work is supported by The JPB Foundation. This report is intended for educational use only. Results are those of the authors and not the funders.

For further information, contact choicesproject@hsph.harvard.edu

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References

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22. Long M, Gortmaker S, Ward Z, et al. Cost Effectiveness of a Sugar-Sweetened Beverage Excise Tax in the U.S. Am J Prev Med. 2015;49(1):112-123.
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24. Colchero MA, Salgado JC, Unar-Munguia M, Molina M, Ng SW, 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):11.
25. Falbe J, Thompson HR, Becker CM, Rojas N, McCulloch CE, Madsen KA. Impact of the Berkeley Excise Tax on Sugar-Sweetened Beverage Consumption. American Journal of Public Health. 2016;106(10):1865-1871.
26. Ng S, Silver L, Ryan-Ibarra S, et al. Berkeley Evaluation of Soda Tax (BEST) Study Preliminary Findings. Presentation at the annual meeting of the American Public Health Association. Paper presented at: Presentation at the annual meeting of the American Public Health Association; November, 2015; Chicago, IL.
27. Powell L, Isgor z, Rimkus L, Chaloupka F. 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.
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35. Long MW, Ward Z, Resch SC, et al. State-level estimates of childhood obesity prevalence in the United States corrected for report bias. Int J Obes. 2016;40(10):1523-1528.
36. 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
37. Bernabe E, Vehkalahti MM, Sheiham A, Lundqvist A, Suominen AL. The Shape of the Dose-Response Relationship between Sugars and Caries in Adults. J Dent Res. 2016;95(2):167-172.
38. Sheiham A, James WPT. A new understanding of the relationship between sugars, dental caries and fluoride use: implications for limits on sugars consumption. Public Health Nutr. 2014;17(10):2176-2184.
39. Health First Colorado Fee Schedule. 2018; http://www.dentaquest.com/getattachment/State-Plans/Regions/Colorado/Provider-Page/Health-First-Colorado-Fee-Schedule-Effective-7-1-17.pdf/?lang=en-US.
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42. UCONN Rudd Center. Revenue Calculator for Sugar-Sweetened Beverage Taxes. 2014; http://www.uconnruddcenter.org/revenue-calculator-for-sugary-drink-taxes. Accessed March, 2016.
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The information in this brief is intended to provide educational information on the cost-effectiveness of sugary drink excise taxes.

Intervention Strategy Description

Implementation of a state excise tax on sugary drinks based on either solely the size of the beverage (“volume tax”; $0.03/ounce) or both beverage size and sugar content (“graduated tax”: $0.03/ounce for higher-sugar-content beverages and $0.02/ounce for lower-sugar-content beverages). The tax in either form would be applied at the wholesale level, be administered by the state and be based on proposals considered by federal, state, and local governments and the American Heart Association.^1‐4

Background 

Sugary drinks include all beverages with added caloric sweeteners. The modeled excise tax does not apply to 100% juice, milk products, or artificially-sweetened beverages. Although sugary drinks consumption has declined in recent years, adolescents and young adults in the United States consume more sugar than the Dietary Guidelines for Americans recommend, with persistent racial/ethnic disparities.^5-8 Randomized trials and longitudinal studies have linked sugary drinks consumption to excess weight gain, diabetes, and cardiovascular disease. Consumption of sugary drinks increases the risk of chronic diseases through its impact on weight and other mechanisms.^9,10 The Dietary Guidelines for Americans, 2015-2020¹¹ recommend that individuals reduce sugary drink intake in order to manage their body weight. Drawing on the success of tobacco taxation and decades of economic research, public health experts have studied taxes on sugary drinks and documented their likely impact.^12-15 In 2009, the IOM recommended that local governments implement tax strategies to reduce consumption of “calorie-dense, nutrient-poor foods,” emphasizing sugary drinks as an appropriate target for taxation.¹⁶

Modeled Tax Structures

In recent years, 7 cities in the U.S. have passed and implemented taxes of varying amounts on sugary drinks based on the size of the beverage (referred to in this brief as a volume tax). The volume tax model in this brief followed this approach.

The United Kingdom is applying a different type of tax structure to a sugary drink tax starting in 2018, which will be a tax rate that varies according to both the amount of sugar in the beverage and the size of the beverage, referred to in this brief as a graduated tax. This approach, according to a recent report by the Urban Institute, may encourage industry to reformulate products to reduce sugar.¹⁷ The American Heart Association has developed a proposal for a graduated tax structure; that framework was used for the graduated tax model.¹

Under both approaches, a tax rate of 0.25 cents/ounce is applied to powdered beverages.

Modeling Framework

An excise tax is linked to changes in body weight through changes in sugary drink price and consumption.

Impact of Tax on Price to Consumers

We assume 100% pass through of the tax over the 10 years. Empirical studies in Mexico and France indicate that approximately the full amount of the excise tax is passed on to consumers.¹⁸ Short-term studies for the local tax in Berkeley indicate less than complete pass through.^3,19,20 The expected percent increase in sugary drink price was estimated based on an average $0.092/ounce; based on national and local price/ounce for several sugary drink categories, including ready-to-drink and powdered mixes;^21-23 and inflated for higher prices in geographically remote locations in Alaska where high transportation costs increase food and beverages prices.²³ The volume tax approach would result in an average 36% price increase; the graduated tax approach would result in a 34% price increase.

Sugary Drink Consumption and Price Elasticity of Demand

We used regionally-adjusted estimates of total sugary drink consumption in 2017 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 the National Health and Nutrition Examination Survey (NHANES) 2005-2010 to estimate current sugary drink consumption levels in Alaska.²⁴ We further adjusted sugary drink consumption to account for Alaska Behavioral Risk Factor Surviellance System (BRFSS)-reported differences by race.²⁵ A review of studies published from 2007-2012 was used to estimate how a change in the price of sugary drinks would impact consumer purchases.²⁶ These studies found that, on average, every 10% price increase would lead to a 12% reduction in purchases.²⁶ Recent research concerning the Berkeley tax indicates a 21% reduction in sugary drink intake among low-income populations.¹⁹

Direct effect of change in sugary drink consumption on change in weight

We conducted evidence reviews for impact of change in sugary drink intake on weight, measured by Body Mass Index (BMI), taking into account any dietary compensation.¹⁵ Four large longitudinal studies in adults^27-30 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 (142 kcal) reduction on BMI (from 0.21 to 0.57). A double-blind randomized controlled trial conducted over 18 months among youth found that kids who consumed an additional daily 8 ounce serving (104 kcal) of sugary drinks gained 1 kg more weight than kids who did not.³¹ We assumed the same impact of change in sugary drink consumption on change in body weight for both tax structure approaches.

Reach

Since obesity can be estimated and tracked for adults and youth as young as age 2, for the purposes of the model the reach of the intervention is defined as all youth and adults ages 2 years and older in Alaska.

Costs

We assume that the two different tax structures would involve the same implementation costs. The policy change would involve start-up and ongoing labor costs for state tax department administrators. To implement the intervention, the state government would need to process tax statements and conduct audits. The state government would also incur a one-time cost to set up the new tax within the state system. Businesses would also need to prepare tax statements and participate in audits, which would require labor from private tax accountants. Cost information was drawn from states and localities with planned or implemented excise taxes on sugary drinks.¹⁵ The cost and benefit estimates do not include expected tax revenue.

CHOICES Microsimulation Model

The CHOICES microsimulation model for Alaska was used to calculate the costs and effectiveness of a volume or graduated sugary drink tax over 10 years (2015–25). This is a stochastic, discrete-time, individual-level microsimulation model designed to simulate the experience of the state population from 2015 to 2025. Cases of obesity prevented were calculated at the end of the model in 2025. The model uses data from the following sources: U.S. Census, American Community Survey, Alaska Behavioral Risk Factor Surveillance System^32,33, NHANES, National Survey of Children’s Health³⁴, the Medical Expenditure Panel Survey, and multiple national longitudinal studies. We calculated uncertainty intervals using Monte Carlo simulations programmed in Java over 1,000 iterations of the model for a population of 1,000,000 simulated individuals scaled to the state population size.¹⁵

According to this model analysis, a $0.03/ounce volume excise tax on sugary drinks in Alaska would reach all residents of the state and prevent over 1,000 cases of childhood obesity and over 7,000 cases of adult obesity in the 10^th year of the model. The sugary drinks excise volume tax would also prevent 156 premature deaths due to sugary drink consumption while avoiding $43.6 million in health care costs by the final year of the model.  We project overall obesity prevalence to decline by 0.93% in the final year of the model with the tax and a decline in childhood obesity prevalence of 0.56% (the difference in the projected Alaska prevalence of obesity without the intervention and the projected Alaska prevalence of obesity in 2025 with the intervention). The sugary drink excise tax is projected to increase healthy life years and avoid $19.30 in health care costs for every $1 to implement the tax. The graduated tax is projected to result in a slightly lower impact on health and health care costs avoided and is also projected to be a cost saving approach for reducing obesity. Detailed model results are presented in the table below. A sugary drink excise tax, using either tax approach, is one of the most cost effective strategies to reduce childhood obesity the CHOICES team has modeled. ¹⁵

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.

^does not include dental costs saved

Impact on Diabetes

 We estimated the impact of the tax-induced reduction in sugary drink intake on type 2 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 sugary drink consumption³⁵ as well as local estimates of diabetes. On average, each 8.5 ounce serving of sugary drinks per day increases the risk of diabetes by 18%. In Alaska, we estimated that a $0.03/ounce volume tax would lead to a 10% reduction in diabetes incidence — an estimated 362 cases of diabetes prevented — over a one-year period once the tax reaches its full effect; the graduated tax would lead to a similar reduction — an estimated 384 cases of diabetes prevented — over this same timeframe.

Impact on Dental Caries

We estimated the impact of a sugary drink excise tax on tooth decay cost using a longitudinal analysis of the relationship between intake of sugars and tooth decay in adults. On average, for every 10 grams higher intake of sugar per day, there is an increase in decayed, missing and filled teeth (DMFT) of approximately 0.10 over 10 years.³⁶ As described above, we assume that the excise tax will result in a reduction in sugary drink intake. There are many studies showing a similar relationship between higher intake of sugars and tooth decay in children and youth³⁷ and thus we assume the same relationship as found in adults.

We used the Alaska Medicaid Assistance: State Fiscal Year 2018 Fee Schedule to estimate a Medicaid cost of treating DMFT as: $692.24 for a permanent crown in children and $106.89 for a filling in both children and adults. These codes reflect treatment for one surface and do not reflect higher reimbursement rates for multi-surface treatment, temporary crowns, or potential flat tax schedules. Based on analysis of data on tooth decay, fillings and crowns for the U.S. population from NHANES 1988-1994 (the last year crowns and fillings were separately reported)³⁹, we estimate that 78.9% of tooth decay in children and 43.5% of tooth decay in adults is treated. Using this same data set, we estimate that 97% of treatment for children is fillings and 82.5% of treatment for adults is fillings.

To estimate Medicaid-specific dental caries cost savings, we used local estimates of the numbers of people enrolled in Medicaid and the proportion receiving Medicaid dental services from  2011; these numbers may be conservative given state-wide Medicaid expansion in Alaska in fiscal year 2016. In Alaska, we estimate that a $0.03/ ounce volume tax would lead to a total savings of $11,300,000 over a period of 10 years in DMFT and of that $628,000 in Medicaid savings.  We estimate that a $0.03/ounce and $0.02/ounce graduated tax would lead to a total savings of $10,800,000 over a period of 10 years in DMFT and of that $597,000 in Medicaid savings. The Medicaid reimbursement tax estimates may underestimate the total cost savings of tooth decay treatment projected here as dental providers may charge higher amounts to patients.

Expected Yearly Sugary Drink Tax Revenue¹

The annual revenue from a state excise tax on sugary drinks is likely to be substantial. Based on data from the Rudd Center and CHOICES model estimates of the consumption of sugary drinks, including powdered beverages, in Alaska, a $0.03/ounce volume excise tax on ready to drink sugary drinks and $0.0025/ounce tax on powdered sugary drinks in Alaska could raise approximately $32.0 million in 2017 and a graduated excise tax ($0.03/ounce and $0.02/ounce) could raise approximately  $36.0 million in 2017.

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 sugary drinks after the tax goes into effect, providing disposable income for other purchases. We estimate that a $0.03/ounce volume tax will result in $109 million in sugary drink savings for consumers after one year and a $0.03/ounce and $0.02/ounce graduated tax will result in $105 million in sugary drink savings for consumers after one year.  In addition, we project that greater health benefits will accrue to low-income consumers who on average consume more sugary drinks than higher-income consumers; the same is true for a number of racial and ethnic groups. Racial/ethnic and income disparities in obesity outcomes should thus decrease following implementation of the modeled tax. In addition, revenue raised from a sugary drinks tax can be reinvested in low-income communities; for instance, in Berkeley, sugary drink 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 prevention and obesity prevention.^40,41

There is opposition to sugary drink excise taxes from the beverage industry, which spends over $4 billion each year nationwide on marketing.⁴² Public support for such taxes generally increases when the public knows the revenue is designated for health promotion activities.⁴³ The modeled tax is likely to be sustainable if implemented based on the history of tobacco excise taxes.

Discussion

We project that the modeled sugary drink excise tax based on a volume tax structure of $0.03/ounce would prevent thousands of cases of childhood and adult obesity, prevent new cases of diabetes, increase healthy life years and avoid more in future health care costs than it costs to implement, with a lower impact for a graduated tax structure. Revenue from the tax could be used for education and health promotion efforts. Implementing the tax could also serve as a powerful health education message to reduce added sugar consumption. There is potential for a shift in social norms of sugary drink consumption based on evidence from tobacco control tax and regulatory efforts.⁴⁴ There is not one reason for the obesity epidemic and there is not one solution. A sugary drink excise tax is just one of a number of cost-effective strategies that could be implemented; a multi-pronged, multi-sector approach will be necessary to reduce obesity.

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, Flax C, 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.

¹Actual fee revenue may be lower than these projected estimates due to several factors. For instance, retailers may have inventories of sugary drinks obtained before a tax is implemented. There may also be some distributors/manufacturers that are non- compliant with the fee. Revenue estimations differ from the UCONN Rudd Center Revenue Calculator for Sugar-Sweetened Beverage Taxes due to the use of locally adjusted consumption estimates and the inclusion of powders taxed at a lower tax rate.

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References

1. American Heart Association. Support for taxing sugary drinks by sugar content: Comment from Nancy Brown, American Heart Association CEO. American Heart Association website. http://newsroom.heart.org/news/support-for-taxing-sugary-drinks-by-sugar-content/. December 12, 2016. Accessed November 8, 2017
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. Bleich SN, Vercammen KA, Koma JW, Li Z. Trends in Beverage Consumption Among Children an Adults, 2003-2014. Obesity (Silver Spring). 2018 Feb;26(2):432-441. doi: 10.1002/oby.22056. Epub 2017 Nov 14.
9. 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.
10. 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.
11. 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/.
12. 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.
13. 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.
14. 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.
15. 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.
16. Institute of Medicine. Local Government Actions to Prevent Childhood Obesity, 2009. National Academies Press: Washington, DC.
17. Francis N, Marron, D, Rueben, K. The Pros and Cons of Taxing Swettened Beverages Based on Sugar Content.Urban Instittue, 2016. Washington, DC.
18. 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.
19. 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.
20. 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
21. 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.
22. Luick, B. Personal Communications about results from December 2016 Alaska Food Cost Survey.
23. Potempa AE, Beverage Costs in Alaska: Select Communities, March 2017. Unpublished data.
24. 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.
25. Sugary Drink Prevalence. Retrieved on Jan 9, 2017, from Alaska Department of Health and Social Services, Indicator-Based Information System for Public Health (AK-IBIS) website: http://ibis.dhss.alaska.gov/.
26. 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.
27. 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.
28. 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.
29. 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.
30. 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.
31. 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.
32. Obesity prevalence. Retrieved on Jan 9, 2017, from Alaska Department of Health and Social Services, Indicator-Based Information System for Public Health (AK-IBIS) website: http://ibis.dhss.alaska.gov/.
33. 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.
34. 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.
35. 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.
36. Bernabé E, Vehkalahti MM, Sheiham A, Lundqvist A, Suominen AL. The Shape of the Dose-Response Relationship between Sugars and Caries in Adults. J Dent Res. 2016 Feb;95(2):167-72.)
37. Sheiham A, James WP. 2014. A new understanding of the relationship between sugars, dental caries and fluoride use: implications for limits on sugars consumption. Public Health Nutr. 17(10):2176–2184.
38. Alaska Medicaid Health Enterprise. Alaska Medicaid Assistance: State Fiscal Year 2018 Fee Schedule. 2018. Avaliable from: http://manuals.medicaidalaska.com/docs/dnld/Fees_Dental_SFY2018.pdf
39. Ward Z, et al. NHANES III Dental Examination: An Incisive Report. unpublished report; 2018.
40. 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/.
41. 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.
42. Federal Trade Commission. A review of food marketing to children and adolescents: follow-up report. Washington, DC: FTC; 2012Dec. Available from: http://www.ftc.gov/os/2012/12/121221foodmarketingreport.pdf.
43. Friedman R. Public Opinion Data, 2013: New Haven, CT: Yale Rudd Center for Food Policy & Obesity.
44. 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 for educational use only.

This brief provides a summary of the CHOICES Learning Collaborative Partnership simulation model of a $0.03-per-ounce state volume excise tax on sugary drinks. The tax, which would be administered by the state, aims to reduce consumption of sugary drinks.

The Issue

Although sugary drinks consumption has declined in recent years, adolescents and young adults in the United States consume more sugary drinks than the Dietary Guidelines for Americans, 2015-2020 recommend, with persistent racial/ethnic disparities.^1-4 Research has linked sugary drink consumption to excess weight gain, diabetes, and heart disease. Sugary drink consumption may increase the risk of developing chronic diseases through effects on body weight and other mechanisms.^5-6 The Dietary Guidelines for Americans, 2015-2020⁷ recommend reducing sugary drink intake to support a healthy body weight. Drawing upon the success of tobacco taxation and decades of economic research, public health experts have studied taxes on unhealthy foods and beverages.^8-11 In 2009, the Institute of Medicine recommended that local governments implement tax strategies to reduce consumption of “calorie-dense, nutrient-poor foods,” emphasizing sugary drinks as an appropriate target for taxation.¹²

About the Potential Impact of a Sugary Drink Excise Tax

The modeled sugary drinks excise tax would apply at the wholesale level (that is, to local bottlers, distributors and/or manufacturers) 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 $0.03-per-ounce excise tax would increase sugary drink prices on average in Alaska by 36.5 percent. Implementation costs of the tax to state government would include a one-time capital cost to build the system to assess and collect the tax and annual administrative cost associated with assessing, processing and collecting tax statements. The implementation costs to the private sector include the cost for efforts from businesses to prepare tax payments and statements and the cost of time required for state audits using private tax accountants. The tax is projected to avoid $19.40 in obesity-related health care costs for every $1 it would cost to implement.

Comparing Costs and Outcomes

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

Implementing the $0.03/oz sugary drink excise tax in Alaska is an investment in the future. The tax would result in:

Conclusions and Implications

According to this model analysis, a $0.03-per-ounce tax on sugary drinks in Alaska would reach all residents of the state and prevent 1,110 cases of childhood obesity and 6,110 cases of adult obesity in year 10. The sugary drinks excise tax would also prevent 156 premature obesity-related deaths and $43.6 million in health care costs would be avoided over 10 years.

There are concerns about the impact of the tax on low-income households. This analysis indicates that households would spend less on sugary drinks after the tax takes effect, increasing disposable income for other purchases. On average, low-income households consume more sugary drinks than higher-income households. Low-income households will spend less on sugary drinks and consume fewer of these drinks after the tax takes effect, which would lead to greater health benefits. The same is true for certain racial and ethnic groups. Thus, racial/ethnic disparities in obesity outcomes should decline following implementation of the proposed tax. In addition, revenue from the sugary drink tax could be reinvested in low-income communities. Implementing the tax in Alaska could send a powerful message to reduce added sugar consumption.

References

1. Wang YC, Bleich SN, 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. Bleich, SN, Vercammen KA, Koma, JW, Li Z. Trends in beverage consumption among children and adults, 2003-2014. Obesity. 2017; doi: 10.1002/oby.22056.
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, 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.
7. 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
8. 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.
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.

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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 either $0.02/ounce or $0.01/ounce of sugar-sweetened beverages (SSBs), administered by the New Hampshire Department of Revenue Administration (DORA) 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 sugary drinks consumption has declined in recent years, adolescents and young adults in the United States consume more sugary drinks than the Dietary Guidelines for Americans recommends, with persistent racial/ethnic disparities.^5-8 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.^9,10 The Dietary Guidelines for Americans, 2015¹¹ 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.^12-15 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.¹⁶

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.¹⁷ Short term studies for the local tax in Berkeley indicate less than complete pass-through.^3,18,19 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).²⁰ 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 New Hampshire.²¹ 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 -0.69.²² Recent research concerning the Berkeley tax indicates a 21% reduction in SSB intake among low income populations.¹⁸

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.¹⁵ Four large longitudinal studies in adults^23-26 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.²⁷

Reach

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

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 states and localities with planned or implemented excise taxes on sugary drinks.¹⁵ The cost and benefit estimates do not include expected tax revenue.

CHOICES Microsimulation Model

The CHOICES microsimulation model for New Hampshire 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 state 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.³⁰ 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 state population size.¹⁵

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.

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 consumption³¹ 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 New Hampshire, we estimated that the $0.02/ounce SSB increased excise tax would lead to a reduction in diabetes incidence- an estimated 817 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 estimated 423 cases of diabetes prevented.

Impact on Tooth Decay

We estimated the impact of a sugar sweetened beverage (SSB) excise tax on tooth decay cost for the state using a longitudinal analysis of the relationship between intake of sugars and tooth decay in adults. On average, for every 10 grams higher intake of sugar per day, there is an increase in DMFT of approximately 0.10 over 10 years.³² As described above, we assume that the excise tax will result in a reduction in SSB intake. There are many studies showing a similar relationship between higher intake of sugars and tooth decay in children and youth³³ and thus we assume the same relationship as found in adults. We used 2018 New Hampshire Medicaid Management Information System (NH MMIS) procedure code data to estimate the average Medicaid cost of treating decayed, missing and filled teeth (DMFT): $173 for a permanent crown and $89 for a filling.³⁴ These codes reflect treatment for one surface and do not reflect higher reimbursement rates for multi-surface treatment, temporary crowns, or potential flat fee schedules. Based on analysis of data on tooth decay, fillings and crowns for the U.S. population from NHANES 1988-1994 (the last year crowns and fillings were separately reported) (personal communication Zachary Ward, April 2018)³⁵, we estimate that 78.9% of tooth decay in children and 43.5% of tooth decay in adults is treated. Using this same data set, we estimate that 97% of treatment for children is fillings and 82.5% of treatment for adults is fillings. To estimate Medicaid-specific dental caries cost savings, we used local estimates of the numbers of people enrolled in Medicaid and the proportion receiving Medicaid dental services. Because of limited Medicaid dental coverage for adults in New Hampshire, only children are included in the Medicaid-specific calculations. In New Hampshire, we estimated that the $0.02/ounce tax over a period of 10 years would lead to a total saving in DMFT of $3.62 million and $695,000 in Medicaid savings. The $0.01/ounce tax would lead to a total over a period of 10 years in DMFT savings of $1.33 million and $255,000 in Medicaid savings. The Medicaid reimbursement fee estimates may underestimate the total cost savings of tooth decay treatment projected here as dental providers may charge higher amounts to patients.

Expected Yearly SSB Tax Revenue

The annual revenue from a city excise tax on sugary beverages is likely to be substantial. According to the Rudd Center Revenue Calculator for Sugar Sweetened Beverage,²¹ a $0.02/ounce excise tax in New Hampshire could raise as much as $78 million and a $0.01/ounce excise tax as much as $54 million in 2017. Actual tax revenue may be lower than these projected estimates due to several factors. The Rudd Center Revenue estimates are based on regional sales data adjusted for state or city specific demographics³⁶; sales data for specific states and/or cities within those regions may vary from the regional average. Retailers may have inventories of sugary drinks obtained before the tax was implemented. Residents living close to city, county and/or state borders may also purchase sugary drinks in neighboring communities without such a tax. Finally, there may be some distributors/manufacturers that are non-compliant with the tax. The Rudd Center notes that their revenue projections “should be considered optimistic…and adjusted downward by 10-30%.”²¹

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.^37,38

There is opposition from the beverage industry, which spends over $4 billion/year nationwide on marketing.³⁹ Public support for such taxes generally increases with earmarking for prevention activities.⁴⁰ 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.⁴¹

Discussion

We project that the proposed SSB excise tax policy of $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 and the New Hampshire Division of Public Health Services, Department of Health and Human Services: Foster SJ and Hammond WC. Funded by The JPB Foundation. Results are those of the authors and not the funders. For further information: contact cgiles@hsph.harvard.edu.

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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. Bleich SN, Vercammen KA, Koma JW, Li Z. Trends in Beverage Consumption Among Children an Adults, 2003-2014. Obesity (Silver Spring). 2018 Feb;26(2):432-441. doi: 10.1002/oby.22056. Epub 2017 Nov 14.
9. 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.
10. 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.
11. 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/.
12. 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.
13. 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.
14. 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.
15. 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.
16. Institute of Medicine. Local Government Actions to Prevent Childhood Obesity, 2009. National Academies Press: Washington, DC.
17. 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.
18. 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.
19. 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
20. 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.
21. 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.
22. 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.
23. 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.
24. 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.
25. 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.
26. 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.
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. Ward Z, Long M, Resch S, Giles C, Cradock A, Gortmaker S. Simulation of Growth Trajectories of Childhood Obesity into Adulthood. N Engl J Med. 2017 Nov 30;377(22):2145-2153.
31. 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.
32. Bernabé E, Vehkalahti MM, Sheiham A, Lundqvist A, Suominen AL. The Shape of the Dose-Response Relationship between Sugars and Caries in Adults. J Dent Res. 2016 Feb;95(2):167-72.)
33. Sheiham A, James WP. 2014. A new understanding of the relationship between sugars, dental caries and fluoride use: implications for limits on sugars consumption. Public Health Nutr. 17(10):2176–2184.
34. NH MMIS Health Enterprise Portal . Procedure Code Listing Dental Services 2012. Updated March 3, 2018. https://nhmmis.nh.gov/portals/wps/wcm/connect/89433b0044ecdd40841dd700fe2877ea/2018+NH+Fee+Schedule+Covered+Procedures+03232018.pdf?MOD=AJPERES
35. Ward, Z. et al . NHANES III Dental Examination: An Incisive Report. Unpublished report. 2018
36. UCONN Rudd Center. Data and Assumptions. March 2017. Accessed April 2018. http://www.uconnruddcenter.org/files/Pdfs/Calculator%20Data_Methods_71917.pdf
37. 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/.
38. 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.
39. 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
40. Friedman R. Public Opinion Data, 2013: New Haven, CT: Yale Rudd Center for Food Policy & Obesity.
41. 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 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

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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

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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.
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