Topic: Sugary Drinks

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

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 taxes on sugary drinks to reduce consumption, reduce obesity, and provide a new source of government revenue.^1-3 A fee on sugary drinks is a similar strategy to increase the price of sugary drinks, improve health, and provide revenue.

We modeled implementation of a state fee on sugary drinks at fees of $0.03/ounce, $0.02/ounce, and $0.01/ounce. This report summarizes the results of the $0.01/ounce fee. Results for additional fee rates can be found in Appendices 1 and 2 (please see pages 15 and 16 in the PDF of the report).

The $0.01/ounce fee is projected to be cost-saving and result in lower levels of sugary drink consumption, thousands of cases of obesity prevented, and tens of millions of dollars in health care cost savings. The fee is projected to save $3.05 in health care costs per dollar invested.

Background 

Although consumption of sugary drinks (defined as all drinks with added caloric sweeteners) has declined in recent years, adolescents and young adults in the United States consume more sugar than the Dietary Guidelines for Americans 2020-2025 recommend, with persistent racial/ethnic disparities.^4-6 According to recent estimates, 56% of adults and 63% of youth in Hawaii report drinking soda.^7-8 The percentage of adults in Hawaii who report drinking soda varies by racial and ethnic group, with more consumption reported by Native Hawaiian, Other Pacific Islander, and Black residents and less consumption reported by Chinese, Japanese, Filipino, and White residents.⁷ On average, teenagers in Hawaii consume more sugary drinks than other age groups, and nearly half of Hawaii teens (46%) drink one or more sugary drinks per day.⁹ 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.¹⁰ An estimated 57% of adults and 28% of youth in Hawaii have overweight or obesity.^8,10

Targeted marketing contributes to differences in consumption levels by income level. People who live in low-income areas are more exposed to advertisements for sugary drinks than those who live in high-income areas.¹¹ Exposure to advertisements may influence sugary drink consumption levels in these communities, as low-income consumers on average consume more sugary drinks than higher income consumers.¹²

Consumption of sugary drinks increases the risk of chronic diseases through changes in body mass index (BMI), insulin regulation, and other metabolic processes.^13-14 Randomized intervention trials and longitudinal studies have linked increases in sugary drink consumption to excess weight gain, diabetes, cardiovascular disease, and other health risks.^13-14 There are persistent racial and ethnic disparities across both sugary drink consumption levels and rates of obesity and chronic disease.^4-6 In light of this evidence, the Dietary Guidelines for Americans 2020-2025¹⁵ recommend that individuals limit their sugary drink intake in order to manage body weight and reduce risk of chronic disease.

Targeted pricing strategies have emerged as one recommended strategy to reduce consumption of sugary drinks.¹⁶ 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 a sugary drink tax.^17-20 In Hawaii, rising costs of health care and insurance premiums are impacting businesses under Hawaii’s Prepaid Health Care Act.²¹ Passage of a sugary drink fee has been discussed as an effective strategy to reduce Hawaii’s health care costs.^21-22 Public poll results in Hawaii show that there is support of a sugary drink fee as an approach to reduce obesity.²²

This report aims to model the projected effect of a Hawaii sugary drink fee on health and disease outcomes over a decade. All drinks with added caloric sweeteners were considered subject to the fee, while 100% juice and milk products were considered exempt. The fee would be reflected in the posted price of sugary drinks, similar to an excise tax.

MODELING FRAMEWORK: How fees on sugary drinks can lead to better health

A state fee is linked to change in BMI through change in sugary drink price and consumption   

How does a fee on distributors affect the price paid by consumers?

Since the cost of a sugary drink fee is incorporated directly into the beverage’s sticker price, a fee structured like 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 fee over 10 years and assume the fee 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.²³ Short-term studies for the local tax in Berkeley indicate imperfect, or less than 100%, pass-through.^2,24-25 The Hawaii Department of Health used an existing tool²⁶ to collect beverage price data from 257 venues in Hawaii, including 74 supermarkets, 74 grocery stores, 90 limited-service venues, 18 fast food restaurants, and one gas station/convenience store. Retail prices were weighted by national share of purchase and consumption.²⁶ The weighted price of sugary drinks in Hawaii was $0.07 per ounce. For example, a $0.01/ounce fee would raise the price of a 12-ounce can of soda from $0.84/can to $0.96/can.

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

To estimate current sugary drink consumption levels in Hawaii, we adjusted national estimates from the National Health and Nutrition Examination Survey (NHANES) 2011-2014 by race and ethnicity group using reported adult sugary drink consumption from the 2014 Hawaii Behavioral Risk Factor Surveillance System²⁷ and youth sugary drink consumption from the 2012, 2013, and 2017 Hawaii Rethink Your Drink Study.²⁸ How much consumers will change their purchases in response to price changes is called price elasticity for demand. We assume for every 10% increase in the price of sugary drinks, there will be a 12% reduction in purchases (a mean own-price elasticity of demand of -1.21).²⁹ Recent research on the Berkeley, CA $0.01/ounce tax found a 21% reduction in sugary drink intake among low-income populations consistent with this estimate.^24,30-33

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 estimated the impact of a change in sugary drink intake on body mass index (BMI), accounting for dietary compensation, based on rigorous studies identified in evidence reviews.²⁰ The relationship among adults was modeled based on the range of estimated effects from four large, multi-year longitudinal studies, which indicated that a one-serving reduction in sugary drinks was associated with a BMI decrease of 0.21 kg/m2 to 0.57 kg/m2 in adults over a 3-year period.^14,34-36 Among youth, we used evidence from a double-blind randomized controlled trial conducted over 18 months, which found that an additional 8-ounce serving of sugary drinks led to a 2.2 pound greater weight gain.³⁷

Reach

This strategy applies to all youth and adults in Hawaii. 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 fee will incur start up and ongoing labor costs for fee administrators in the Hawaii Department of Health. To implement the strategy, the Hawaii Department of Health would need to process fee statements and conduct audits. Businesses would also need to prepare fee statements and participate in audits, which would require labor from private fee accountants. Cost information was drawn from the Hawaii state bottle recycling program and localities with planned or implemented fees on soft drinks.^20,38 The cost and benefit estimates do not include expected revenue from the fee.

CHOICES Microsimulation Model

The CHOICES microsimulation model for Hawaii 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,^20,39 and created a virtual population of Hawaii residents using data from: the U.S. Census, American Community Survey, Behavioral Risk Factor Surveillance System,⁴⁰ NHANES, National Survey of Children’s Health,⁴¹ the Medical Expenditure Panel Survey, multiple national longitudinal studies, and obesity prevalence data provided by the Hawaii Department of Health. Using peer-reviewed methodology, we forecasted what would happen to this virtual population with and without a sugary drink fee to model changes in disease and mortality rates and health care costs due to the fee.

Results: ^$0.01/ounce State Fee on Sugary Drinks

Overall, the model shows that a sugary drink fee is cost-saving. Compared to the simulated natural history without a fee, the fee is projected to result in lower levels of sugary drink consumption, fewer cases of obesity, fewer deaths, and health care cost savings greater than $30 million over the 10-year period under consideration.

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

Results for additional fee rates can be found in Appendix 1 ($0.02/ounce fee) and Appendix 2 ($0.03/ounce fee). Please see pages 15 and 16 in the PDF of the report.

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 and ethnicity in Hawaii. The CHOICES model used Hawaii data to build a virtual Hawaii population. Without any strategy:

Sugary drink consumption is highest in the Native Hawaiian and Other Pacific Islander populations

Obesity prevalence is highest in the Native Hawaiian and Other Pacific Islander populations

Results: ^$0.01/ounce State Fee on Sugary Drinks By Race and 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.

SNAPSHOT IN 2027

Cases of obesity prevented in Hawaii from a ^$0.01/ounce state fee on sugary drinks by race and ethnicity group*

Some groups are projected to experience larger declines in consumption of servings* of sugary drinks per person in Hawaii in the first year of fee implementation

Impact on Diabetes

We estimated the impact of the fee-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 consumption⁴² as well as state-level estimates of diabetes incidence⁴³ and prevalence.⁴⁴ On average, each 8.5 ounce serving of sugary drinks per day increases the risk of diabetes by 18%.⁴²

In Hawaii, we estimated that the proposed sugary drink fee would lead to a 6% reduction in diabetes incidence in the sugary drink fee models. Impact on diabetes incidence was calculated over a one-year period once the fee 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 fee 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 (i.e. tooth decay) of approximately 0.10 over 10 years.⁴⁵ There are many studies showing a similar relationship between higher intake of sugars and tooth decay in children and youth⁴⁶ and thus we assume the same relationship as found in adults.

We used 2018 Hawaii Department of Human Services Med-Quest procedure code⁴⁷ data to estimate a Medicaid cost of treating tooth decay as: $234 for a permanent crown on Oahu or $562 on neighboring islands, and $39 for a filling on Oahu or $55 on neighboring islands. 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),⁴⁸ we estimate that 78.9% of tooth decay in children and 43.5% of tooth decay in adults are 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 savings in costs of dental treatment, we used state estimates of the numbers of people enrolled in Medicaid and CHIP and the proportion receiving Medicaid dental services. Because of limited Medicaid dental coverage for adults in Hawaii, only children are included in the Medicaid-specific calculations. In Hawaii, we estimated that a $0.01/ounce fee would lead to a total of $173,000 in Medicaid savings over a period of 10 years due to a reduction in treatment of tooth decay. 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 Sugary Drink Fee Revenue

The annual revenue from a state fee on sugary drinks is likely to be substantial. According to the Rudd Center Revenue Calculator for Sugary Drink Taxes⁴⁹ a $0.01/ounce fee in Hawaii could raise as much as $42.9 million in 2020.

Actual fee 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 demographics;⁵⁰ 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 fee was implemented. There may also be some distributors/manufacturers that are non-compliant with the fee. The Rudd Center notes that their revenue projections “should be adjusted downward by 10% – 30%.”⁴⁹

Considerations for Health Equity

Concerns have been raised regarding the impact of the fee on households with low-income, because lower-income populations tend to consume more sugary drinks.¹² Economic studies indicate that with a sugary drink tax, consumers will buy less of these products.²⁹ This change in purchasing is substantial, so that consumers can be expected to spend less on sugary drinks after a fee is implemented. Using sales data from the Rudd Center Revenue Calculator for Sugary Drink Taxes,⁴⁹ along with local price data,^26,28 we project that individuals and households in Hawaii will spend less money on sugary drinks after a $0.02 per oz fee: about $104 less per year per person, and $314 per year less for an average household. This would free up disposable income for other consumer purchases. A typical consumer in Hawaii who continues to consume these beverages after the fee is in place would be expected to pay fees of about $2.50 per week, or $129/year.

In addition to these changes in spending, health benefits are projected to be greatest among low-income individuals. We project that more health benefits from this policy will accrue to low-income consumers; the same is true for a number of racial and ethnic groups. As noted above, in Hawaii, the percentage of adults who drink one or more soda per day varies by racial and ethnic group.⁷ Under the proposed fee, we project that Native Hawaiian, Other Pacific Islander, and Filipino Hawaii residents would see more cases of obesity prevented than expected for the average Hawaii resident. On that basis, the proposed fee should decrease disparities in obesity outcomes and improve health equity.

These expected changes in consumption and health outcomes have led economists to conclude that low-income populations benefit substantially from sugary drink taxes.⁵¹

Implementation Considerations

Revenue raised from a sugary drink fee can be reinvested in low-income communities. For instance, in Berkeley, CA, sugary drink fee revenue has been allocated for spending on school and community programs, many serving low-income populations or communities of color, to promote healthy eating and diabetes and obesity preventions.⁵² Public support for such fees generally increases with earmarking for preventive health activities.⁵³

There is opposition from the food and beverage industry, which spends billions of dollars promoting their products.⁵⁴ Relatively small beverage excise taxes are currently applied across many states. The proposed fee is likely to be sustainable if implemented based on the successful history of tobacco cigarette stamp 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.⁵⁵ This shift in norms can be facilitated by assessing sugary drinks, which reduces the attractiveness of non-caloric beverages and discourages consumers from selecting any sugary drink options when making beverage decisions.

Conclusion

We project that the proposed fee 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. Savings in future health care costs would lead to a slowing of rising health care premium costs for employers and individuals across Hawaii. Revenue from the fee can be used for education and health promotion efforts. Implementing the fee could also serve as a powerful social signal to reduce sugar consumption.

Citation

Irvin L, Inoue K, Bowie A, Ching L, Starr R, Ryan J, White BS, La Chica T, Gortmaker SL, Long MW, Ward  ZJ, Giles CM, Barrett JL, Resch SC, Greatsinger A, Garrone ME, Tao H, Flax CN, Cradock AL. Hawaii: Sugary Drink Fee [Report]. Hawaii Department of Health, Hawaii Public Health Institute, Honolulu, HI, and the CHOICES Learning Collaborative Partnership at the Harvard T.H. Chan School of Public Health, Boston, MA; March 2021. For more information, please visit www.choicesproject.org

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

Funding

Funded by The JPB Foundation. Results are those of the authors and not the funders.

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

Appendices

Results for additional fee rates can be found in Appendix 1 ($0.02/ounce fee) and Appendix 2 ($0.03/ounce fee). Please see pages 15 and 16 in the PDF of the report.

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

Executive Summary

In California, health disparities and inequities persist for specific subsets of the population – the reasons for this are deep-seated and multi-faceted. Sugary drink consumption is one health behavior for which disparities exist, and it has been linked to excess weight gain, obesity, and the incidence of type 2 diabetes, heart disease, and cancer. Federal, state, and local governments have considered excise taxes on sugary drinks to reduce consumption, reduce obesity and associated chronic disease, and provide a new source of government revenue.^1,2,3 In California, statewide legislative measures to introduce sugary drink excise taxes have been proposed for a number of years in efforts to improve the health of Californians and reduce inequities, but none have passed.⁴

We modeled the implementation of a state excise tax on sugary drinks in California at a tax rate of $0.02/ounce. CHOICES cost-effectiveness analysis compared the costs and outcomes over a 10-year time horizon (2020-2030) of implementing a tax with the costs and outcomes associated with not implementing a tax.

The tax modeled is projected to be cost-saving (that is, the tax saves more in future health care costs than it costs to implement even absent the potential revenues). The tax is projected to decrease sugary drink consumption among California residents, prevent nearly 200,000 cases of obesity, and save more than 1.8 billion dollars in health care costs. People who consume sugary drinks are expected to spend less on these drinks with the tax in place. We also project that non-Latino Black/African American and Latino California residents will experience even greater health benefits than the average resident after the tax is implemented. These results are summarized below and in the complete report.

Background 

In California, health disparities and inequities persist for specific subsets of the population – the reasons for this are deep-seated and multi-faceted including systems that perpetuate the unequal distribution of power and resources along racial lines.⁵ Overconsumption of added sugars is common, with more than half of the United States population ages two years and older exceeding the daily recommended limit for added sugars put forth in the 2015-2020 Dietary Guidelines for Americans.⁶ Sugary drinks (defined as all drinks with added caloric sweeteners) are the number one source of added sugars that Americans consume.⁶

According to recent estimates, 40% of California residents drink at least one serving of sugary drinks daily.⁷ Higher than average sugary drink consumption levels are common among Latino and Black/African American Californians.⁷ In 2018, the beverage industry spent $1 billion to advertise sugary drinks in television, digital platforms (internet and mobile), radio, magazines, newspapers, coupons, and outdoor venues in order to drive preferences and purchases of unhealthy beverages.⁸ Beverage companies frequently target their sugary drink advertising towards youth, and are more likely to target Black/African American and Latino youth. Additionally, Black/African American and Latino populations are less likely to be the audience for marketing of healthy drinks like water.⁸

Strong evidence links increased consumption of sugary drinks to higher risk for obesity and other diseases that are tied to what people eat, such as type 2 diabetes,^9,10 and the prevalence of these diseases is higher among people with lower income and Latino and Black/African American Californians.^7,11 An estimated 37% of adults¹¹ and 21% of youth¹² in California have obesity. If current trends continue, 42% of adults in the state will have obesity by 2030.¹¹

Taxes have emerged as a promising strategy to reduce consumption of sugary drinks. In addition to the potential of a sugary drink tax to reduce obesity, it has cost implications as well. This report models the projected effect of a sugary drink excise tax on health, disease outcomes, and health care cost savings over the next decade.

Projected Impact of a Sugary Drink Excise Tax in California

We modeled implementation of a California excise tax on sugary drinks, at a tax rate of $0.02/ounce. All drinks with added caloric sweeteners were considered to be taxed, while 100% juice, milk products, and beverages with fewer than 25 kcals per 12 fluid ounces were considered exempt.

Results: What did we find?

We project that implementation of a state excise tax on sugary drinks only, at a tax rate of $0.02/ounce, has a 100% likelihood of being cost-saving. It will prevent more than 195,000 cases of childhood and adult obesity, prevent new cases of diabetes, increase healthy life years, improve health equity, and save more in future health care costs than it will cost to implement. Implementing the tax could also serve as a powerful social signal to reduce sugar consumption. Model results are presented as the most likely estimate as well as a likely range. The likely range is an uncertainty interval that is estimated by considering uncertainty from data sources and population projections and calculating a central range in which 95 percent of these model results fell.

How many people would be affected by the tax?

This can be thought of as reach or the number of people affected by the strategy. Based on our modeling, the table below presents the estimated number of people affected by the tax in the first year and the number of people affected by the tax over ten years.

The Likely Range is a 95% uncertainty interval estimated by running the model 1,000 times, taking into account uncertainty from data sources and population projections, and calculating a central range in which 95 percent of these model results fell.

What effect would the tax have on sugary drink consumption and spending?

Compared to projections of sugary drink consumption without a tax, the tax is projected to result in lower levels of sugary drink consumption. We project a 90% likelihood that individuals and households who purchase sugary drinks will spend less on sugary drinks after the tax is implemented, even though sugary drink prices will be higher with the tax. 

The Likely Range is a 95% uncertainty interval estimated by running the model 1,000 times, taking into account uncertainty from data sources and population projections, and calculating a central range in which 95 percent of these model results fell.

Average Annual Pre-Tax Sugary Drink Consumption Per Person in California by Race/Ethnicity

DATA SOURCES: California Health Interview Survey 2011-2017, NHANES 2011-2016, UConn Rudd Center for Food Policy & Obesity Sugary Drink Tax Calculator 2020; Analysis by CHOICES Project, 2020.
^✝Each serving is 12 ounces.

While Californians, on average, consume 251 servings of sugary drinks each in a year, higher than average sugary drink consumption levels are common among Latino and Black/African American Californians.

Post-Tax Decrease in Sugary Drink Consumption Per Person in California by Race/Ethnicity*

*In the first year following an excise tax of $0.02/ounce on sugary drinks.

^✝Each serving is 12 ounces.

With a tax, sugary drink consumption would decrease the most among Latino and Black/African American Californians. On average, each Latino Californian would reduce consumption by 85 servings per year and each Black/African American Californian would reduce consumption by 102 servings per year.

The Likely Range is a 95% uncertainty interval estimated by running the model 1,000 times, taking into account uncertainty from data sources and population projections, and calculating a central range in which 95 percent of these model results fell.
*Other includes people of Native Hawaiian and Pacific Islander, American Indian and Alaska Native, and two or more races.

What effect would the tax have on obesity and related health outcomes, overall and by race/ethnicity?

Compared to projections of obesity and related health outcomes without a tax, the tax is projected to result in fewer cases of obesity and fewer deaths over the 10-year period under consideration. Under the proposed tax, Black/African American Californians will experience a 39% higher than average reduction in obesity prevalence, and Latino Californians will experience a 33% higher than average reduction in obesity prevalence.

The Likely Range is a 95% uncertainty interval estimated by running the model 1,000 times, taking into account uncertainty from data sources and population projections, and calculating a central range in which 95 percent of these model results fell.
Costs and health outcomes are discounted at 3% per year, unless otherwise noted. Discounting estimates the present value of costs and health outcomes that are spent or received in the future, given that they are worth more today than they would be tomorrow.
*Not discounted.

Pre-Tax Obesity Prevalence in California by Race/Ethnicity

DATA SOURCES: California FitnessGram 2013-2017, NHANES 2011-2016, NSCH 2003-2018; Analysis by CDPH and the CHOICES Project, 2020.

Nearly half of Latino (43.5%) and Black/African American (43.6%) Californians have obesity, while smaller percentages of Asian (16.1%), White (33.2%), and Californians of another race (33.9%) have obesity.

Post-Tax Cases of Obesity Prevented in 2030 in California by Race/Ethnicity*

*With an excise tax of $0.02/ounce on sugary drinks.

A tax in California could prevent 198,000 cases of obesity in 2030. 58% of prevented obesity cases will be among Latino Californians, while they represent 42% of the population. 8% of prevented obesity cases will be among Black/African American Californians, while they represent 6% of the population.

The Likely Range is a 95% uncertainty interval estimated by running the model 1,000 times, taking into account uncertainty from data sources and population projections, and calculating a central range in which 95 percent of these model results fell.
Costs and health outcomes are discounted at 3% per year, unless otherwise noted. Discounting estimates the present value of costs and health outcomes that are spent or received in the future, given that they are worth more today than they would be tomorrow.
*Not discounted.
^✝Other includes people of non-Latino ethnicity and Native Hawaiian and Pacific Islander, American Indian and Alaska Native, and two or more races.

How much would the tax cost to implement?

There are initial and ongoing costs to implementing the tax. To implement the strategy, the California Department of Tax and Fee Administration would perform several administrative activities, including identifying and notifying taxpayers, revising manuals and tax return documents and systems, processing tax statements, and conducting 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 tax programs that were previously implemented in California¹³ and from planned or implemented excise taxes on sugary drinks in other states and localities.¹⁴ The cost and benefit estimates do not include expected tax revenue (discussed below). Below we include annual and 10-year implementation costs.

The Likely Range is a 95% uncertainty interval estimated by running the model 1,000 times, taking into account uncertainty from data sources and population projections, and calculating a central range in which 95 percent of these model results fell.
Costs and health outcomes are discounted at 3% per year, unless otherwise noted. Discounting estimates the present value of costs and health outcomes that are spent or received in the future, given that they are worth more today than they would be tomorrow.

How much would the tax save in health care costs compared to what it costs to implement?

The estimated reduction in obesity attributable to the tax leads to lower projected health care costs, offsetting tax implementation costs and resulting in a net cost savings. The difference between total health care costs with no strategy and lower health care costs with a strategy represents 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.

The Likely Range is a 95% uncertainty interval estimated by running the model 1,000 times, taking into account uncertainty from data sources and population projections, and calculating a central range in which 95 percent of these model results fell.
Costs and health outcomes are discounted at 3% per year, unless otherwise noted. Discounting estimates the present value of costs and health outcomes that are spent or received in the future, given that they are worth more today than they would be tomorrow.

What would the impact of the tax be on Medi-Cal* spending?

Based on the projected reduction in adult obesity prevalence due to the tax (compared to what prevalence would be without the tax), adult obesity-related Medi-Cal expenditures in California are estimated to decrease. This does not include potential reductions in child obesity-related expenditures, and may be an underestimate if adults utilizing Medi-Cal have higher than average health care costs of obesity.¹⁵ A previous analysis found that 12.2% of adult Medi-Cal expenditures were due to obesity.¹⁶ We estimate that, in California, obesity accounted for $8.9 billion of $73.3 billion total adult Medi-Cal expenditures in 2019.^16,17 This assumes that 74% of all Medi-Cal payments are for adults.¹⁸ The state paid 37% of total Medi-Cal expenditures in 2019,¹⁷ so we estimate that the state paid $3.3 billion in adult obesity-related Medi-Cal expenditures.

*Medi-Cal is California’s Medicaid program

The Likely Range is a 95% uncertainty interval estimated by running the model 1,000 times, taking into account uncertainty from data sources and population projections, and calculating a central range in which 95 percent of these model results fell.
Costs and health outcomes are discounted at 3% per year, unless otherwise noted. Discounting estimates the present value of costs and health outcomes that are spent or received in the future, given that they are worth more today than they would be tomorrow.

What are the key cost-effectiveness metrics?

Since we project that the tax saves more in future health care costs than it costs to implement, there is a 100% likelihood that the tax would be cost-saving. 

Costs and health outcomes are discounted at 3% per year, unless otherwise noted. Discounting estimates the present value of costs and health outcomes that are spent or received in the future, given that they are worth more today than they would be tomorrow.
*There is a 100% likelihood that these metrics are cost-saving.

What effect would the tax have on diabetes?

Economic studies indicate that with a sugary drink tax, consumers will buy less of these products.¹⁹ A $0.02/ounce tax will decrease the consumption of sugary drinks and this has other health implications that we can estimate. In California, the proposed sugary drink excise tax would lead to a 7% reduction in diabetes incidence over one year once the tax reaches full effect. We calculated this impact on diabetes incidence using projected declines in sugary drink consumption, not directly via microsimulation.

What effect would the tax have on tooth decay?

In California, we estimated that a $0.02/ounce tax would lead to a reduction of 502,000 decayed, missing, and filled teeth among Medi-Cal* recipients and $39.5 million in savings to Medi-Cal over 10 years due to a reduction in treatment of tooth decay. For the entire California population, we estimated the tax would lead to a reduction of 1,620,000 decayed, missing, and filled teeth and $135 million in savings for all payers due to a reduction in treatment of tooth decay. The Medi-Cal reimbursement tax estimates may underestimate the total cost savings of tooth decay treatment projected here as dental providers may charge higher amounts to patients. Impact on tooth decay was calculated using projected declines in sugary drink consumption, not directly via microsimulation.

*Medi-Cal is California’s Medicaid program

Key Considerations for Health Equity

Concerns have been raised regarding the impact of the tax on low-income households, because lower-income populations tend to consume more sugary drinks.²⁰ Economic studies indicate that with a sugary drink tax, consumers will buy less of these products.¹⁹ This change in purchasing is substantial, so that consumers can be expected to spend less on sugary drinks after a tax is implemented. Using sales data from the Rudd Center Revenue Calculator for Sugary Drink Taxes,²¹ we project that individuals and households in California will spend less money on sugary drinks after a $0.02 per ounce tax: about $48 less per year per person, and $142 per year less for an average household. This would free up disposable income for other consumer purchases. A typical consumer in California who continues to consume these beverages after the tax is in place would be expected to pay tax of about $1.40 per week, or $73/year.

In addition to these changes in spending, health benefits are projected to be greatest among low-income individuals. We also project that greater health benefits will accrue among Latino and Black/African American California residents compared with White and Asian residents. Using data on sugary drink consumption in the CHOICES model, the average daily consumption of sugary drinks among people in California varies by race/ethnicity group (see pre-tax figures on pages 4 and 6). Under the proposed tax, we project that Black/African American Californians would see a 39% greater reduction in obesity prevalence than average, and Latino Californians would see a 33% greater reduction in obesity prevalence than average. On that basis, the proposed tax could decrease disparities in obesity outcomes and improve health equity.

These expected changes in consumption and health outcomes have led economists to conclude that low-income populations benefit substantially from sugary drink taxes.²²

Implementation Considerations

A $0.02/ounce statewide excise tax on sugary drinks in California could raise as much as $1.3 to $1.8 billion in annual revenue.²¹ Revenue raised from a sugary drink tax could be reinvested in communities with low-income. For instance, in Berkeley, CA, revenue from a municipal sugary drink tax has been allocated for spending on school and community programs, many serving families with low-income or communities of color, to promote healthy eating, diabetes, and obesity prevention.^23,24 Public support for such taxes generally increases with earmarking for preventive health activities.²⁴

There is opposition from the food and beverage industry, which spends billions of dollars promoting their products.²⁵ 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.²⁶ 

Modeling Assumptions and Summary of the CHOICES Microsimulation Model

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

An excise tax is incorporated directly into a beverage’s shelf price. 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 consumers²⁷ and consistent evidence in the U.S. indicating that beverage taxes increase prices, although there is some variation by store type.^28-31   

The expected change in sugary drink price was estimated based on national sugary drink prices³² and regional sales data for several categories of sugary drinks (i.e., soda, sports drinks, fruit drinks, energy drinks, sweetened teas, sweetened coffees, and enhanced water).²¹ In California, we assume the average price of sugary drinks is almost $0.09/ounce, so a $0.02/ounce tax would raise prices by 23%. This means that, for example, the price of a 12-ounce can of soda would increase from $1.06 to $1.30/can post-tax.

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

How much consumers will change their purchases in response to price changes is called price elasticity for demand. We assume for every 10% increase in the price of sugary drinks, there will be a 12% reduction in purchases (a mean own-price elasticity of demand of -1.21).¹⁹ Recent research on the Berkeley, CA $0.01/ounce tax found a 21% reduction in sugary drink intake among populations with low-income consistent with this estimate.^33-37 In California, we assume a $0.02/ounce tax that raises prices by 23% would reduce purchases by 27%. We assume this 27% reduction in purchases results in a 27% reduction in consumption.

To estimate current sugary drink consumption levels in California, we used national estimates of sugary drink consumption from NHANES 2011-2016 adjusted to race- and ethnicity-specific estimates of sugary drink consumption among children, teens, and adults from the California Health Interview Survey³⁸ and estimates of sugary drink sales in California from the UConn Rudd Center for Food Policy & Obesity.²¹

What are the health effects of decreasing sugary drink consumption?

Research has shown that decreasing sugary drink consumption can have positive effects on health in youth and adults.

Assumptions about sugary drinks and obesity risk

We estimated the impact of a change in sugary drink intake on body mass index (BMI), accounting for dietary compensation, based on rigorous studies identified in evidence reviews.¹⁴ The relationship among adults was modeled based on the range of estimated effects from four large, multi-year longitudinal studies, which indicated that a one-serving reduction in sugary drinks was associated with a BMI decrease of 0.21 kg/m² to 0.57 kg/m² in adults over a 3-year period.^39-42 Among youth, we used evidence from a double-blind randomized controlled trial conducted over 18 months, which found that an additional 8-ounce serving of sugary drinks led to a 2.2 pound greater weight gain.⁴³

Assumptions about sugary drinks and diabetes risk

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 consumption⁴⁴ as well as state-level estimates of diabetes incidence from the CDC Atlas 2016⁴⁵ and prevalence from the California Health Interview Survey 2017-2018.⁴⁶ On average, each 8.5-ounce serving of sugary drinks per day increases the risk of diabetes by 18%.⁴⁴

Assumptions about sugary drinks and tooth decay

We estimated the impact of a sugary drink excise tax on tooth decay and tooth decay treatment costs 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 (i.e., tooth decay) of approximately 0.10 over 10 years.⁴⁷ There are many studies showing a similar relationship between higher intake of sugars and tooth decay in children and youth⁴⁸ and thus we assume the same relationship as found in adults. We used the Medi-Cal Dental Provider Handbook 2019⁴⁹ to estimate a Medi-Cal cost of treating tooth decay as: $278 for a permanent crown and $58 for a filling. These codes reflect treatment for one to four surfaces but do not reflect the actual frequency of multi-surface treatment among Medi-Cal recipients or for higher reimbursement rates due to 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),⁵⁰ 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 Medi-Cal-specific savings in costs of dental treatment, we used estimates of the number of people enrolled in the Medi-Cal Dental Program in 2018.⁵¹

CHOICES Microsimulation Model

The CHOICES microsimulation model was used to calculate the costs and effectiveness of a tax in California over 10 years (2020-2030). We forecasted what would happen to a virtual population of residents in California with and without a sugary drink tax to model changes in disease and mortality rates and health care costs due to the tax. Cases of obesity prevented were calculated at the end of the model period in 2030. The model was based on peer-reviewed CHOICES methodology.^14,52-54 We created a virtual population of residents in California using data from: the U.S. Census, American Community Survey, Behavioral Risk Factor Surveillance System, NHANES, National Survey of Children’s Health,⁵² the Medical Expenditure Panel Survey, multiple national longitudinal studies, and obesity prevalence data provided by California Department of Public Health. Impacts on diabetes, tooth decay, Medicaid spending, and household spending on sugary drinks were calculated based on summary results from the model, not directly via microsimulation.

Of note, the CHOICES microsimulation model does not include annual revenue generation from a state excise tax on sugary drinks in any of the cost-effectiveness calculations. The Rudd Center Revenue Calculator for Sugary Drink Taxes estimates potential annual revenues from excise taxes on sugary drinks and is “intended to provide a rough estimate” for municipalities to consider.²¹ According to the Rudd Center,²¹ a $0.02/ounce excise tax in California could raise as much as $1.8 billion in 2020. Accounting for 10-30% non-compliance as the Rudd Center advises, annual revenue estimates range between $1.3 – $1.8 billion.

Citation

Gouck J, Whetstone L, Walter C, Pugliese J, Kurtz C, Seavey-Hultquist J, Barrett J, McCulloch S, Reiner J, Garrone M, Cradock A, Gortmaker, S. California: A Sugary Drink Excise Tax. California Department of Public Health, Sacramento, CA, the County of Santa Clara Public Health Department, San Jose, CA, and the CHOICES Learning Collaborative Partnership at the Harvard T.H. Chan School of Public Health, Boston, MA; March 2021. For more information, please visit www.choicesproject.org

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 and the Centers for Disease Control and Prevention (U48DP006376). The findings and conclusions are those of the author(s) and do not necessarily represent the official position of the Centers for Disease Control and Prevention or other funders.

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

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50. Ward Z, et al. NHANES III Dental Examination: An Incisive Report. unpublished report; 2018.
51. California Department of Health Care Services, Multi Year Medi-Cal Dental Measures Data by Age Groups Calendar Year 2013 to 2018. Accessed October 19, 2020 at: https://data.chhs.ca.gov/dataset/test-dhcs-multi-year-dental-measures-data-by-age-groups-calendar-year-2013-to-2015
52. Ward ZJ, Long MW, Resch SC, Giles CM, Cradock AL, Gortmaker SL. Simulation of Growth Trajectories of Childhood Obesity into Adulthood. New England Journal of Medicine. 2017;377(22):2145-2153.
53. Ward ZJ, Long MW, Resch SC, et al. Redrawing the US Obesity Landscape: Bias-Corrected Estimates of State-Specific Adult Obesity Prevalence. PLoS One. 2016;11(3):13.
54. Long MW, Ward Z, Resch SC, et al. State-level estimates of childhood obesity prevalence in the United States corrected for report bias. International Journal of Obesity. 2016;40(10):1523-1528.

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 state excise tax on sugary drinks, at a tax rate of $0.02/ounce. Powdered drink mixes were modeled at a tax rate of $0.0025 per reconstituted fluid ounce according to the package instructions.

The tax modeled is projected to be cost-saving and result in lower levels of sugary drink consumption, thousands of cases of obesity prevented, and hundreds of millions of dollars in health care cost savings. For every dollar invested, this tax is projected to save $28.88 in health care costs.

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 and ethnic disparities.^5-9 According to recent estimates, 27% of adults and 14% of youth in Utah 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 26% of adults¹³ and 10% of youth¹⁴ in Utah have obesity.

Consumption of sugary drinks increases the risk of chronic diseases through changes in body mass index (BMI), insulin regulation, and other metabolic processes.^15-17 Randomized intervention trials and longitudinal studies have linked increases in sugary drink consumption to excess weight gain, diabetes, cardiovascular disease, and other health risks.^15-16 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 their body weight and reduce their risk of chronic disease.

Targeted taxation has emerged as one recommended strategy to reduce consumption of sugary drinks.¹⁸ 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 a sugary drink excise tax.^19-22 Sugary drinks include all drinks with added caloric sweeteners. Proposed and enacted sugary drink excise taxes typically do not apply to 100% juice, milk products, or diet drinks. This report aims to model the projected effect of a sugary drink excise tax on projected health and disease outcomes over the next decade.

Modeling Framework: How excise taxes can lead to better health

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

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

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.²³ Short term studies for the local tax in Berkeley, CA indicate imperfect (or less than 100%) pass-through.^3,24,25 More recent analyses from Philadelphia, PA indicate that over all the sales studied, pass-through was close to complete. The pass-through seen in pharmacies was higher than in supermarkets and mass merchandise settings.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 increasing the price of sugary drinks change individual sugary drink consumption?

We used national estimates of sugary drink consumption from NHANES 2011-2016 adjusted to local race- and ethnicity-specific estimates of adult sugary drink consumption from the Utah Behavioral Risk Factor Surveillance System²⁸ and youth sugary drink consumption from the Youth Behavioral Risk Surveillance System¹⁰ to estimate current sugary drink consumption levels in Utah. The mean own-price elasticity of demand for sugar-sweetened soft drinks (not including diet) is -1.21.²⁹ The own-price elasticity reflects how much consumers will change their purchases in response to price changes. For example, an elasticity of -1.21 estimates that a 16% price increase would lead to a 19% reduction in purchases. Recent research on the Berkeley, CA tax found a 21% reduction in sugary drink intake among low-income populations consistent with this estimate.²⁴

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.²² Four large, multi-year longitudinal studies in adults^16,30-32 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 0.21 kg/m2 to 0.57 kg/m2 in adults over a 3-year period. 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 pound greater weight gain.³³

Reach

The intervention applies to all youth and adults in Utah. However, the model estimates the health 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.

Implementation Costs

We assume the tax will incur start-up and ongoing labor costs for tax administrators in the Utah State Tax Commission.³⁴ To implement the intervention, the Utah State Tax Commission 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 sugary drinks.²² The cost and benefit estimates do not include expected tax revenue.

CHOICES Microsimulation Model

The CHOICES microsimulation model for Utah 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,^22,35-37 and created a virtual population of Utah residents using data from: U.S. Census, American Community Survey, Behavioral Risk Factor Surveillance System, NHANES, National Survey of Children’s Health,³⁷ the Medical Expenditure Panel Survey, multiple national longitudinal studies, and obesity prevalence data provided by Utah Department of Health. 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 State 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 $132 million dollars in health care savings 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 represents 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.

The CHOICES microsimulation model does not include annual revenue generation from a state excise tax on sugary drinks in any of the cost-effectiveness calculations. Revenue is likely substantial. The Rudd Center Revenue Calculator for Sugary Drink Taxes estimates potential annual revenues from excise taxes on sugary drinks only and is “intended to provide a rough estimate” for municipalities to consider.³⁸ According to the Rudd Center,³⁸ a $0.02/ounce excise tax in Utah could raise as much as $181 million in 2019. Actual tax revenue may be lower than these projected estimates; the Rudd Center advises to adjust the revenues down by 10-30% to account for non-compliance. These would result in annual revenues of $127 – $163 million.

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% 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.

Results: ^$0.02/ounce State Excise Tax on Sugary Drinks by Race and Ethnicity

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.

*Reference category.

Pre-tax Sugary Drink Consumption in Utah by Race and Ethnicity

Pre-tax Obesity Prevalence in Utah by Race and Ethnicity

Cases of Obesity Prevented in Utah in 2027*

Decrease in Sugary Drink Consumption by Race and Ethnicity*

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 consumption³⁹ 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%.³⁹

In Utah, 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 one year 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.⁴⁰ 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 youth⁴¹ and thus we assume the same relationship as found in adults.

We used the Bureau of Coverage and Reimbursement Policy Coverage and Reimbursement Fee Schedule⁴² data to estimate a Medicaid cost of treating DMFT as: $307.90 for a permanent crown and $45.54 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),⁴³ 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 number of people enrolled in Medicaid and the proportion of people receiving Medicaid dental services. Because of limited Medicaid dental coverage for adults in Utah, only children are included in the Medicaid-specific calculations. In Utah, we estimated that a $0.02/ounce tax would lead to a total of $464,000 in Medicaid savings over a period of 10 years due to a reduction in treatment of DFMT. 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 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.⁴⁴ Using sales data from the Rudd Center Revenue Calculator for Sugary Drink Taxes,³⁸ we project that individuals and households in Utah will spend less money on sugary drinks after the tax is implemented.

In addition, low-income consumers, on average, consume more sugary drinks than higher-income consumers. We project that greater health benefits from this policy will accrue to low-income consumers. We also project that greater health benefits will accrue among Hispanic Utah residents compared with non-Hispanic residents of white or other race. Using data from NHANES and Utah on sugary drink consumption in the CHOICES model, the average daily consumption of sugary drinks by people in Utah varies by race and ethnic group (see pre-tax graphs above). Under the proposed tax, Hispanic Utahns will experience a 74% greater reduction in obesity prevalence compared to White non-Hispanic residents. On that basis, the proposed tax could decrease disparities in obesity outcomes.

Implementation Considerations

Revenue raised from a sugary drink tax could also 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.^45,46 Public support for such taxes generally increases with earmarking for preventive health activities.⁴⁶

There is opposition from the food and beverage industry, which spends billions of dollars promoting their products.⁴⁷ 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.⁴⁸ This shift in norms can be facilitated by taxing sugary drinks, which reduces the attractiveness of non-caloric drink options and discourages consumers from selecting any sugary drink options when making beverage decisions.

Conclusion

We project that implementation of a state excise tax on sugary drinks only, at a tax rate 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 will cost to implement. Implementing the tax could also serve as a powerful social signal to reduce sugar consumption.

Results prepared by the Salt Lake County Health Department and the CHOICES Project Team at the Harvard T.H. Chan School of Public Health: McKinnon A, Ward Z, Barrett J, Cradock A, Resch S, Flax C, and Gortmaker S. December 2019. Funded by The JPB Foundation. Results are those of the authors and not the funders. For further information, contact choicesproject@hsph.harvard.edu

Appendices

Appendices A and B showing the health effects of a $0.02/ounce excise tax on sugary drinks in Salt Lake County, UT, may be viewed starting on page 15 in the full report PDF.

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References

1. American Public Health Association Taxes on Sugar-Sweetened Beverages. 2012.
2. Hakim D, Confessore N. Paterson seeks huge cuts and $1 billion in taxes and fees. New York Times. January 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. American Journal of Public Health. 2015;105(11):2194-2201.
4. Leonhardt D. The battle over taxing soda. The New York Times. May 19, 2010.
5. 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.
6. Bleich SN, Wang YC, Wang Y, Gortmaker SL. Increasing consumption of sugar-sweetened beverages among US adults: 1988-1994 to 1999-2004. American Journal of Clinical Nutrition. 2009;89(1):372-381.
7. Kit BK, Fakhouri THI, Park S, Nielsen SJ, Ogden CL. Trends in sugar-sweetened beverage consumption among youth and adults in the United States: 1999-2010. American Journal of Clinical Nutrition. 2013;98(1):180-188.
8. Bleich SN, Vercammen KA, Koma JW, Li ZH. Trends in Beverage Consumption Among Children and Adults, 2003-2014. Obesity. 2018;26(2):432-441.
9. U.S. Department of Health and Human Services, U.S. Department of Agriculture. 2015 – 2020 Dietary Guidelines for Americans. December 2015.
10. Centers for Disease Control and Prevention (CDC), Utah Department of Health. Youth Risk Behavior Surveillance System. 2017.
11. Park S, Xu F, Town M, Blanck H. Prevalence of Sugar-Sweetened Beverage Intake Among Adults – 23 States and the District of Columbia, 2013. MMWR Morb Mortal Wkly Report 2016. 2016;65(7):169-174.
12. Brownell KD, Frieden TR. Ounces of Prevention – The Public Policy Case for Taxes on Sugared Beverages. New England Journal of Medicine. 2009;360(18):1805-1808.
13. Utah Department of Health. (2018). Public Health Indicator Based Information System (IBIS) Utah’s Public Health Data Source. Health Indicator of Overweight or Obese. https://ibis.health.utah.gov/ibisph-view/indicator/view/OvrwtObe.UT_US.html
14. Utah Department of Health. (2018). Public Health Indicator Based Information System (IBIS) Utah’s Public Health Data Source. Health Indicator of Obese Among Children and Adolescents. https://ibis.health.utah.gov/ibisph-view/indicator/view/OvrwtChild.LHD.html
15. Malik VS, Pan A, Willett WC, Hu FB. Sugar-sweetened beverages and weight gain in children and adults: a systematic review and meta-analysis. American Journal of Clinical Nutrition. 2013;98(4):1084-1102.
16. Chen L, Caballero B, Mitchell DC, et al. Reducing Consumption of Sugar-Sweetened Beverages Is Associated with Reduced Blood Pressure: A Prospective Study among U.S. Adults. Circulation. 2010;121(22):2398-2406.
17. Wang Y. The potential impact of sugar-sweetened beverage taxes in New York State. A report to the New York State Health Commissioner. New York: Columbia Mailman School of Public Health. 2010.
18. IOM (Institute of Medicine), National Research Council. Local Government Actions to Prevent Childhood Obesity. Washington, DC: The National Academies Press; 2009.
19. Chaloupka F, Powell L, Chriqui J. Sugar-sweetened beverage taxes and public health: A Research Brief. Minneapolis, MN; 2009.
20. Brownell KD, Farley T, Willett WC, et al. The Public Health and Economic Benefits of Taxing Sugar-Sweetened Beverages. New England Journal of Medicine. 2009;361(16):1599-1605.
21. Long M, Gortmaker S, Ward Z, et al. Cost Effectiveness of a Sugar-Sweetened Beverage Excise Tax in the U.S. American Journal of Preventive Medicine. 2015;49(1):112-123.
22. Gortmaker SL, Wang YC, Long MW, et al. Three Interventions That Reduce Childhood Obesity Are Projected To Save More Than They Cost To Implement. Health Affairs. 2015;34(11):1932-1939.
23. 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.
24. 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.
25. 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.
26. Roberto CA, Lawman HG, LeVasseur MT, Mitra N, Peterhans A, Herring B, Bleich SN. Association of a Beverage Tax on Sugar-Sweetened and Artificially Sweetened Beverages With Changes in Beverage Prices and Sales at Chain Retailers in a Large Urban Setting. JAMA. 2019 May 14;321(18):1799-1810. doi: 10.1001/jama.2019.4249.
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.
28. Centers for Disease Control and Prevention (CDC), Utah Department of Health. Utah Behavioral Risk Factor Surveillance System. 2013.
29. 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. Obesity reviews: an official journal of the International Association for the Study of Obesity. 2013;14(2):110-128.
30. Mozaffarian D, Hao T, Rimm EB, Willett WC, Hu FB. Changes in Diet and Lifestyle and Long-Term Weight Gain in Women and Men. New England Journal of Medicine. 2011;364(25):2392-2404.
31. 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. Archives of Internal Medicine. 2008;168(14):1487-1492.
32. Schulze MB, Manson JE, Ludwig DS, et al. Sugar-sweetened beverages, weight gain, and incidence of type 2 diabetes in young and middle-aged women. JAMA-J Am Med Assoc. 2004;292(8):927-934.
33. de Ruyter JC, Olthof MR, Seidell JC, Katan MB. A trial of sugar-free or sugar-sweetened beverages and body weight in children. New England Journal of Medicine. 2012;367(15):1397-1406.
34. Personal Communication with Utah State Tax Commission. 2019.
35. Ward ZJ, Long MW, Resch SC, Giles CM, Cradock AL, Gortmaker SL. Simulation of Growth Trajectories of Childhood Obesity into Adulthood. New England Journal of Medicine. 2017;377(22):2145-2153.
36. Ward ZJ, Long MW, Resch SC, et al. Redrawing the US Obesity Landscape: Bias-Corrected Estimates of State-Specific Adult Obesity Prevalence. PLoS One. 2016;11(3):13.
37. Long MW, Ward Z, Resch SC, et al. State-level estimates of childhood obesity prevalence in the United States corrected for report bias. International Journal of Obesity. 2016;40(10):1523-1528.
38. UCONN Rudd Center. Revenue Calculator for Sugary Drink Taxes. 2014; http://www.uconnruddcenter.org/revenue-calculator-for-sugary-drink-taxes. Accessed November, 2019.
39. Imamura F, O’Connor L, Ye Z, et al. Consumption of sugar sweetened beverages, artificially sweetened beverages, and fruit juice and incidence of type 2 diabetes: systematic review, meta-analysis, and estimation of population attributable fraction. Br J Sports Med. 2016;50(8):496-U484.
40. Bernabe E, Vehkalahti MM, Sheiham A, Lundqvist A, Suominen AL. The Shape of the Dose-Response Relationship between Sugars and Caries in Adults. Journal of Dental Research. 2016;95(2):167-172.
41. 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 Nutrition. 2014;17(10):2176-2184.
42. Utah Department of Health Medicaid. Bureau of Coverage and Reimbursement Policy Coverage and Reimbursement Fee Schedule Download. 2019.
43. Ward Z, et al. NHANES III Dental Examination: An Incisive Report. unpublished report; 2018.
44. Farrelly MC, Bray JW. Response to increases in cigarette prices by race/ethnicity, income, and age groups – United States, 1976-1993 (Reprinted from MMWR, vol 47, pg 605-609, 1998). JAMA-J Am Med Assoc. 1998;280(23):1979-1980.
45. Lynn J. City Council votes to allocate ‘soda tax’ revenue to school district, city organizations. The Daily Californian. Jan. 20, 2016, 2016.
46. 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.
47. Federal Trade Commission. A review of food marketing to children and adolescents: follow-up report. Washington, DC Dec 2012 2012.
48. 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. American Journal of Public Health. 2005;95(6):1016-1023

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

1. American Public Health Association Taxes on Sugar-Sweetened Beverages. 2012.
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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. American Journal of Public Health. 2015;105(11):2194-2201.
4. Leonhardt D. The battle over taxing soda. The New York Times. May 19, 2010.
5. 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.
6. 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. 2009;89(1):372-381.
7. Kit BK, Fakhouri THI, 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;98(1):180-188.
8. Bleich SN, Vercammen KA, Koma JW, Li ZH. Trends in Beverage Consumption Among Children and Adults, 2003-2014. Obesity. 2018;26(2):432-441.
9. U.S. Department of Health and Human Services, U.S. Department of Agriculture. 2015 – 2020 Dietary Guidelines for Americans. December 2015 2015.
10. Colorado Department of Public Health and Enviornment. Colorado Behavioral Risk Factor Surviellence System 2015.
11. Colorado Department of Public Health and Enviornment. Colorado Health Indicators: Health Behaviors and Conditions.
12. Brownell KD, Frieden TR. Ounces of Prevention – The Public Policy Case for Taxes on Sugared Beverages. N Engl J Med. 2009;360(18):1805-1808.
13. Denver Childhood Obesity Monitoring Report 2012-2016, Denver Public Health, http://www.denverpublichealth.org/Portals/32/Public-Health-and-Wellness/Public-Health/Health-Information/Docs/DPH-Health-Information-and-Reports-2016-Denver-Childhood-Obesity-Report_Final_20170803.pdf?ver=2017-08-03-101748-433
14. Harris J, Shehan C, Gross R, et al. Food advertisting targeted to Hispanic and Black youth: Contributing to health disparities. August 2015.
15. Yancey AK, Cole BL, Brown R, et al. A cross-sectional prevalence study of ethnically targeted and general audience outdoor obesity-related advertising. Milbank Q. 2009;87(1):155-184.
16. Malik VS, Pan A, Willett WC, Hu FB. Sugar-sweetened beverages and weight gain in children and adults: a systematic review and meta-analysis. The American Journal of Clinical Nutrition. 2013;98(4):1084-1102.
17. Chen L, Caballero B, Mitchell DC, et al. Reducing Consumption of Sugar-Sweetened Beverages Is Associated with Reduced Blood Pressure: A Prospective Study among U.S. Adults. Circulation. 2010;121(22):2398-2406.
18. Wang Y. The potential impact of sugar-sweetened beverage taxes in New York State. A report to the New York State Health Commissioner. New York: Columbia Mailman School of Public Health. 2010.
19. IOM (Institute of Medicine), National Research Council. Local Government Actions to Prevent Childhood Obesity. Washington, DC: The National Academies Press; 2009.
20. Chaloupka F, Powell L, Chriqui J. Sugar-sweetened beverage taxes and public health: A Research Brief. Minneapolis, MN2009.
21. Brownell KD, Farley T, Willett WC, et al. The Public Health and Economic Benefits of Taxing Sugar-Sweetened Beverages. N Engl J Med. 2009;361(16):1599-1605.
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.
23. Gortmaker SL, Wang YC, Long MW, et al. Three Interventions That Reduce Childhood Obesity Are Projected To Save More Than They Cost To Implement. Health Aff. 2015;34(11):1932-1939.
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.
28. Colorado Department of Public Health and Enviornment. Health Kids Colorado Survey. 2013 – 2015.
29. 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. Obesity reviews : an official journal of the International Association for the Study of Obesity. 2013;14(2):110-128.
30. Mozaffarian D, Hao T, Rimm EB, Willett WC, Hu FB. Changes in Diet and Lifestyle and Long-Term Weight Gain in Women and Men. The New England journal of medicine. 2011;364(25):2392-2404.
31. 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. Archives of internal medicine. 2008;168(14):1487-1492.
32. Schulze MB, Manson JE, Ludwig DS, et al. Sugar-sweetened beverages, weight gain, and incidence of type 2 diabetes in young and middle-aged women. JAMA-J Am Med Assoc. 2004;292(8):927-934.
33. 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 J Med. 2012;367(15):1397-1406.
34. Ward ZJ, Long MW, Resch SC, Giles CM, Cradock AL, Gortmaker SL. Simulation of Growth Trajectories of Childhood Obesity into Adulthood. N Engl J Med. 2017;377(22):2145-2153.
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.
40. Ward Z, et al. NHANES III Dental Examination: An Incisive Report. unpublished report; 2018.
41. Farrelly MC, Bray JW. Response to increases in cigarette prices by race/ethnicity, income, and age groups – United States, 1976-1993 (Reprinted from MMWR, vol 47, pg 605-609, 1998). JAMA-J Am Med Assoc. 1998;280(23):1979-1980.
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.
43. Lynn J. City Council votes to allocate ‘soda tax’ revenue to school district, city organizations. The Daily Californian. Jan. 20, 2016, 2016.
44. Friedman R. Public Opinion Data, 2013. New Haven, CT: Yale Rudd Center for Food Policy & Obesity; 2013.
45. Federal Trade Commission. A review of food marketing to children and adolescents: follow-up report. Washington, DC Dec 2012 2012.
46. 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. American Journal of Public Health. 2005;95(6):1016-1023.

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

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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/.
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