Money talks, but according to a new study analyzing the potential effect of a tax on soda, it might not speak loud enough to help people lose weight.
In an effort to combat the growing obesity epidemic, legislators in some states have recently contemplated charging a sugar tax on sweetened beverages such as sodas, sports drinks and fruit juices. Some estimates suggest that a 20% tax on these drinks would lower consumption by about 16%. (More on Time.com: Guiltless Gluttony: Why We Eat More From ‘Small’ Packages)
But to date, it has not been clear whether increasing the price of these drinks will actually curb the expanding girth of the American population. So Eric Finkelstein, an economist at Duke-National University of Singapore, decided to model what effect a 20% and 40% tax on these beverages would have on weight.
He was surprised to find that the impact was modest at best. Opponents of sugar taxes have raised concerns that they would be regressive, unfairly targeting those at lower incomes. But according to Finkelstein’s model, which included data from the Nielsen Homescan panel, a survey of purchases made by a representative sample of American households, lower-income families did not appear to be affected by the tax, at least not judging by weight loss: they showed among the smallest changes in weight over a one-year period.
“I didn’t expect that finding for the lowest income group,” he says. “I thought they would be the most responsive to a tax.”
What may be happening instead, he says, is that low-income individuals simply switch to other untaxed sweetened alternatives, or find alternate ways to offset the added cost of the tax, by buying in bulk or choosing generic brands. (More on Time.com: A Man Dies After Overdosing on Caffeine)
And that points to an important, perhaps overlooked factor when it comes to applying a tax to curb consumption. While Finkelstein’s analysis did find an overall loss in weight, albeit small, associated with both a 20% and 40% tax on sodas, weight loss was even greater when the tax was applied to all sweetened beverages, including the alternatives that people might buy instead of soda.
“What we found was that if you target just one of these beverages, you have a very modest effect on consumption,” he says. “What it boils down to is that if you tax things that are really high-calorie per dollar, then you get a bigger bang for your buck than if you tax things that are less calorie intensive, because people will switch to more calorie intense products.”
He found, for example, that people in the study rarely switched from sugared soda to either diet soda or water. “People seemed to switch roughly to products with the same amount of calories,” he says.
To understand better how people make purchasing choices in response to higher prices, and how that may affect weight, Finkelstein is conducting a follow-up study comparing the effect of taxing not just sweetened beverages but other densely sugared foods as well. By including other high-calorie sweets such as candy, he is hoping to determine whether a soda tax will simply push people to switch their caloric intake from beverages to other products, and whether such behavior could explain the relatively small effect on weight loss that soda taxes appear to have. (More on Time.com: Study: Hey, Hipsters, Mexican Coke Might Be a Myth)
Even so, says Dr. Kelly Brownell, director of the Rudd Center for Food Policy and Obesity at Yale University, such studies can only simulate how people might react to soda taxes. “The fact is that nobody has been able to see how people will really respond under these conditions,” he says.
The best data we have to predict the effects of a sugar tax come from the tobacco industry, which saw a 4% drop in consumption with every 10% hike in price. Based on studies his group has done, Brownell says that people’s consumption of sugared beverages may be even more dependent on price, and that higher costs will drive down Americans’ thirst for sweetened drinks. “Before the tobacco tax was introduced, nobody really knew what the impact would be, but what we found was that the taxes worked better than expected, because we hadn’t expected the greatest impact to be on youth who were only thinking of taking up the habit, and were saved a lifetime in health care costs,” he says. “The same could happen with a [sugar tax].”
Even with the modest weight loss he found in his models, Finkelstein believes taxes on high-calorie foods such as sweetened beverages do make sense as a way to combat obesity. But, he says, such tariffs need to be applied in the right way in order to lead to health benefits. “As an economist, part of the reason that I think these taxes are appropriate is because the government provides a large subsidy to farmers of corn and soy so the prices of these goods that contain high fructose corn syrup remain below market prices. So to me, it makes sense that the government should consider taxing products that contain these ingredients,” he says. “But if you target just one of them, then you’ll have a very modest effect on consumption, so it seems hard to justify taxes on sweetened beverages and not on candy or sugared cereal as well.”
That’s an argument that might be too bitter for the sweet-toothed American public to buy just yet.