A report from the Tax Foundation suggests that excise taxes on sugary beverages may not be a miracle weight loss solution after all.1 Many countries, including the United States, slap a tax on sugar-sweetened beverages – the thought is that with the price increase, people will consume less of these beverages, improving health. Apparently, people tend to just go find their sugar elsewhere rather than not consuming it at all.
The report studied sugar-sweetened beverage taxes (SSBTs… not to be confused with SSTBs, specified service trades or businesses for the purposes of the §199A deduction) across Europe and generally found that although the SSBTs successfully increased prices and decreased consumption of targeted beverages, the overall impact on public health remains as flat as day-old soda. When consumers face higher soda prices, they simply substitute other high-calorie options.
SSBTs can incentivize manufacturers to reduce sugar content in their products, for example the UK’s Soft Drinks Industry Levy has different tax rates for beverages containing 5-8g of sugar per 100ml versus those with 8g+ per 100ml. The thresholds create financial incentives for manufacturers to reformulate products to fall just below tax rate bands.
Besides, the report notes, simply reducing sugar will not (on its own) improve health outcomes. There are other studies that suggest that a broader tax on sugar would be more effective in reducing sugar consumption, but could be complex to implement.
The bottom line is that soda taxes may generate some revenue fizz, but when it comes to public health benefits, they’re mostly empty calories.
