Study: Taxing sugary beverages by calorie more efficient than ounce-based tax

RESEARCH TRIANGLE PARK, N.C.— Taxing sugar-sweetened beverages by calorie may be more efficient in improving public health than an ounce-based tax, according to a study by researchers from RTI International, New York State Department of Health, and New York University.

The study, published online in the American Journal of Agricultural Economics, suggests that beverage tax policies should target ingredients, particularly sugars, to curb obesity. 

"A calorie-based tax may motivate beverage manufacturers to reformulate sugar-sweetened beverage products to contain less sugar, while an ounce-based tax may be less likely to have such an effect on product formulation," said Chen Zhen, Ph.D., a research economist at RTI, and the paper's lead author. "Many existing beverage tax proposals in the United States are based on a per-volume tax. This strategy overlooks that many sugary products on the market are differentiated by calorie content." 

Researchers developed an economic demand model, called a fully modified distance metric (FMDM) model, to estimate the efficiency of a calorie-based tax compared to an ounce-based tax. The model included the product demand for 178 beverage products accounting for 90 percent of all nonalcoholic beverage sales (excluding milk, coffee and tea).

"Our goal is to devise a tax strategy that discourages calorie consumption while placing the smallest economic burden on consumers," Zhen said.  "A calorie-based tax gives consumers a greater incentive to reduce calories from sugary beverages than a volume-based tax." 

The model showed that a per-calorie tax can achieve the same amount of beverage calorie reduction as a per-ounce tax but cost consumers about 10 percent less in tax paid. The per-calorie tax may encourage producers to reformulate beverages to contain less sugar, which will also reduce taxes for consumers since there will be fewer calories to tax.

The research showed that a 4 cents per beverage calorie tax on sugar-sweetened beverages would reduce beverage calories purchased at supermarkets by 9.3 percent, compared with 8.6 percent from a half-cent per ounce tax. On average, there are 92 calories per eight ounces in a sugar-sweetened beverage.

Sugary beverages, including soft drinks, fruit drinks, and sports and energy drinks, are a significant risk factor for obesity and obesity-related health concerns. A 2008 RTI study found that medical costs attributable to obesity are estimated at $147 billion or more per year. 

The study was funded by the Robert Wood Johnson Foundation's Healthy Eating Research, the Centers for Disease Control and Prevention, and the National Heart, Lung, and Blood Institute of the National Institute of Health.