By Ounce or By Calorie

The Differential Effects of Alternative Sugar-Sweetened Beverage Tax Strategies

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A calorie-based tax on sugar-sweetened beverages was proven to be more effective than a volume-based tax according to these researchers.

The Issue

U.S. policy-makers often propose taxes on sugar-sweetened beverages (SSBs) as a method of combating obesity. Ideally, an SSB tax would encourage reduction in SSB consumption at minimal cost to consumers, but no city or state has so far implemented one effectively. Most current SSB tax proposals are per volume (per ounce).

Key Findings

  • This study predicts that a .04 cent per-calorie tax on all SSBs could reduce annual per capita consumption by 5,800 calories.

  • A calorie-based beverage tax cost an estimated $1.40 less in consumer surplus loss than an ounce-based tax, per 3,500 beverage calories reduced.

Conclusion

A calorie-based SSB tax is more effective than an ounce-based tax because it achieves more calorie reduction with a smaller loss in consumer surplus. The authors propose a new product-level demand model to compare the efficiency of calorie-based and ounce-based taxes. This model, in contrast to the category-level demand models used in existing research, allows the analysis of product-level substitutions.

About the Study

This study aimed to determine the most effective type of SSB tax by comparing the effects of taxing sugar-sweetened beverages (SSBs) by calories and by ounces, using supermarket scanner sales data for 178 nonalcoholic beverages across four New York markets.