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Behavioral Economics

EGULATION FA L L 2 0 1 0

H E A L T H & M E D I C I N E

oughly one-third of U.S. adults are clas-
sified as obese, which is defined as hav-
ing a body mass index of 30 or higher.
Obesity rates for most all age and gender
groups exceed 30 percent, with men aged
20 to 39 years being the lone exception.
Obesity is especially prevalent among

minorities; African-Americans have a 51 percent higher preva-
lence of obesity, and Hispanics have 21 percent higher obesi-
ty prevalence than whites.

Obesity has become a major public health concern, given
its association with chronic conditions that include diabetes,
hypertension, high cholesterol, stroke, heart disease, certain
cancers, and arthritis. Excess mortality stemming primarily
from cardiovascular disease and diabetes is also believed to be
associated with higher grades of obesity. Researchers at the
Centers for Disease Control and Prevention in Atlanta esti-
mate that obesity now accounts for 9.1 percent of all medical
spending — $147 billion in 2008.

Various factors are believed to promote rising obesity rates,
but the hypothesized relationship between “nutritively sweet-
ened beverages” (NSBs) and obesity has increasingly become
the focus of attention. Some public health advocates call for
Pigouvian taxes (see “Much Ado about Pigou,” Spring 2010)
on these beverages, often referred to as “soda taxes,” as effec-
tive interventions that will lower obesity as well as generate
tax revenues that can be used to fund public programs aimed
at lowering obesity.

In this article, we discuss the economic theory and empir-
ical evidence of using soda taxes to lower obesity. We conclude
that these taxes are unlikely to significantly lower obesity, and
that they promote many unintended consequences that may
adversely affect public health. Higher tax revenues stemming
from soda taxes are also likely to be used to expand govern-

Michael L. Marlow and Alden F. Shiers are professors of economics at California

Polytechnic State University in San Luis Obispo.

Taxes on sugary beverages would do little to lower obesity.

Would Soda Taxes
Really Yield

Health Benefits?
BY MICHAEL L. MARLOW AND ALDEN F. SHIERS

California Polytechnic State University

ment programs other than those associated with controlling
obesity, much as cigarette tax revenue now does.

FLAWS IN THE ECONOMIC CASE FOR SODA TAXES

Proponents of soda taxes argue for government intervention
because, they say, free markets fail to allocate resources in soda
markets efficiently, with the ultimate consequence being too
many obese people. Three assumptions underlie their argument:

n Soda causes obesity.
n Consumers lack adequate information and beverage
choices.
n Soda drinkers impose external costs on others who
pick up some portion of obese people’s higher med-
ical costs.

Let us consider each of these assumptions.

Soda causes obesity? The correlation between soda con-
sumption and obesity rates does not imply that soda con-
sumption causes obesity. Other possibilities include obesity
causes soda consumption, no relationship exists between
soda consumption and obesity, and soda consumption and
obesity are interdependent. Moreover, even if soda con-
sumption did cause obesity, there is no reason to believe
that soda is the lone causal factor behind obesity; other like-
ly candidates include lack of exercise, age, genetics, con-
sumption of other high-calorie foods and beverages, and
many other factors.

Tax advocates claim that soda consumption causes obesi-
ty, but evidence demonstrating this casual link is weak at
best. A 2006 review article by Vasanti Malik et al. of the rela-
tionship between the consumption of sugar-sweetened bev-
erages and obesity found 16 studies indicating a significant
positive relationship between consumption and body mass
index, 10 studies that did not find a significant positive rela-
tionship, and four studies with mixed results. A 2007 literature

REGULATION FA L L 2 0 1 0 35

review by Lenny Vartanian et
al. found eight studies with a
significant positive relation-
ship, 15 studies with no sig-
nificant positive relationship,
and two studies with mixed
results.

Although the authors of
these surveys conclude that
the evidence supports the
view that soda consumption
causes obesity, we suggest the
evidence remains less than
clear. Most articles in their
surveys demonstrate correla-
tion and not causation, and
ignore confounding factors
such as age, exercise, genetics,
and other factors that proba-
bly affect body weight. The
Malik survey acknowledges
this point:

Overall, results from our
review support a link
between the consumption
of sugar-sweetened bever-
ages and the risks of over-
weight and obesity.
However, interpretation of
the published studies is
complicated by several
method-related issues,
including small sample size,
short duration of follow-up,
lack of repeated measures
of dietary exposures and
outcomes, and confounding
by other diet and lifestyle
factors.

A recent commentary by
David Allison and Richard
Mattes in JAMA: The Journal
of the American Medical
Association acknowledges this
same point:

Given current evidence, lit-
tle can be concluded with
confidence beyond the fact
that requiring individuals to drink large amounts of NSBs
causes greater weight gain than not doing so. Randomized
controlled trials of NSB consumption reduction have been
applied effectiveness studies rather than rigorously controlled
efficacy studies. Only the latter ensures fidelity of the inter-
vention.

The authors conclude that much of the research and subsequent
news reports surrounding the issue have been extensively influ-
enced by multiple biases that have eroded the reporting of
objective science on this important public health matter.

Unempowered consumers? Some soda tax advocates claim
that consumers drink too much soda as a result of inadequate
access to healthier food and beverage choices. But there are
roughly 40,000 food products in the typical U.S. supermar-
ket. It is difficult to argue that this array of products some-
how ignores consumer preferences, especially given compet-
itive pressures and technological advances in processing,
storage, transportation, and communication.

The growing variety of food products reflects an industry
that adapts to consumer preferences regarding health-relat-M

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ed choices. Between 1987 and 2004, 35,272 new food products
labeled “low fat” or “no fat” were introduced into the U.S. food
market. That led researchers at the U.S. Department of
Agriculture to conclude that unhealthy food consumption
patterns do not stem from a market failure to supply healthy
food and beverage choices.

While regular soda accounts for roughly 70 percent of
U.S. soda sales, diet soda sales have been growing rapidly.
Some forecasters predict that diet sales will eventually over-
take regular soda. It thus seems that an active private market
exists in providing “healthy” choices to consumers, which sug-
gest that there is little need for government intervention into
soda markets.

Externalities? Soda tax advocates argue that negative exter-
nalities — external costs not fully accounted for in markets —
indicate a market failure in which too much soda is con-
sumed. Externalities are argued to exist because consumers
who become obese will not fully pick up the higher medical
costs associated with their obesity. Taxes equal to these exter-
nal costs would theoretically raise soda prices to levels con-
sistent with efficient consumption levels.

However, it is unlikely that taxes could ever correct for any
externality associated with obesity. The problem with the
externality argument is that, even if obesity raises health care
costs of the obese, this externality should be corrected by hav-
ing health insurers impose surcharges on obese insureds that
reflect the additional costs. Few criticize surcharges imposed
by auto insurance firms on drivers with drunk driving records,
so why not correct for higher costs associated with obesity
through insurance premiums?

Unfortunately, federal health care legislation passed ear-
lier this year severely reduces or eliminates differential
health insurance pricing. The legislation requires insur-
ance companies to provide coverage for preventive health
services, which include obesity screening and nutritional
counseling. The legislation does not require obese people
to pay more for insurance, but provisions could possibly
allow insurers to charge premiums to people with “lifestyle
risk factors” such as tobacco use. It remains doubtful that
obesity will be considered a lifestyle risk, however, given the
legislation’s focus on obesity screening and nutritional
counseling. Moreover, expected eliminations of pre-existing
exclusion clauses that previously allowed insurers to deny
coverage to obese individuals and those with past bariatric
surgery would reinforce the view that obesity is not a
lifestyle risk factor that should be reflected in higher insur-
ance premiums.

Still, it remains unclear that soda consumption causes
obesity, or that it is the sole causal factor behind obesity.
And even if it is, the sensible policy would be to alter health
insurance premiums to allow for obesity risk premiums, not
a Pigouvian tax on soda. Such reform would not rely on the
false premise that soda consumption is the lone causal factor
behind obesity, as such a risk premium would “tax” body
weight, which is the essential problem that soda tax advocates
claim they are interested in controlling. Yet we are not aware

of any soda tax advocate who also supports adjusting health
insurance premiums.

Finally, even if obesity shortens lives, economic theory
indicates that obesity reflects a positive externality rather
than a negative one. That is, external benefits associated with
obesity are not fully accounted for in markets since obese indi-
viduals collect less from Medicare and Social Security over
their shorter lifetimes. Kip Viscusi has estimated that smok-
ers “save” taxpayers roughly 23¢–32¢ for each pack of ciga-
rettes they smoke because of reduced social insurance costs
— in addition to excise taxes already levied on cigarettes. A
recent paper by K. McPherson analyzing United Kingdom data
found that, although annual health care costs are highest for
obese people earlier in life (until age 56 years), and are high-
est for smokers at older ages, the ultimate lifetime costs are
highest for the healthy (nonsmoking, non-obese) people.
McPherson finds that life expectancy from age 20 is reduced
by five years for obese people and seven for smokers. The con-
sequence is that healthy people live to incur greater medical
expenditure on average, more than compensating for the ear-
lier excess costs related to obesity or smoking.

Non-obese individuals thus receive external benefits in
the form of additional public resources. If we were to follow
soda tax advocates’ thinking, then we should in fact subsidize
soda consumption so as to encourage it. Despite tax advocates’
fondness for taxing negative externalities, they never seem as
anxious to correct positive externalities.

PIGOUVIAN TAXES IN PRACTICE

Even if tax advocates are correct about soda consumption
causing so many problems, it is unlikely that soda taxes would
rectify the externality. The distance between theory and prac-
tice in the real world is great enough to warrant much skep-
ticism over the ability of policymakers to calculate the “correct”
tax and then implement it in a world where politics and spe-
cial interests have vested interests in designing tax codes.

Policymakers must legislate “correct” taxes to truly correct
externalities. Since it remains unclear that soda consumption
causes obesity or whether it reflects negative or positive exter-
nalities, the possible range of “correct” soda taxes lies between
positive, zero, and negative values. Thus, it is unclear if obesi-
ty should be taxed, subsidized, or simply left alone, although
tax advocates assume it should be taxed. Even if they are cor-
rect, the probability that policymakers know the correct tax is
slim to none, thus leading to further possibilities that the tax
is set too high, causing further erosion of resource efficiency.

Economic theory also indicates that, if there are negative
externalities, taxes should vary over different beverages as
well as different groups of consumers. Studies imply that
the effects of NSBs on obesity differ for different types of
drinks and, because different racial/ethnic groups have dif-
ferent preferences, that taxes should vary between groups. As
noted above, the prevalence of obesity is highest for non-
Hispanic blacks, followed by Hispanics, and then non-
Hispanic whites. In addition, consumption data reveal that
white persons consume more carbonated soft drinks than
other race/ethnic groups, and that blacks consume more

36 REGULATION FA L L 2 0 1 0

H E A L T H & M E D I C I N E

REGULATION FA L L 2 0 1 0 37

high-calorie fruit drinks and ades. If NSBs are a major cause
of obesity, then these data suggest that fruit drinks and ades
are a greater cause of obesity than carbonated soft drinks, and
therefore fruit drinks and ades should be subjected to a high-
er tax than carbonated soft drinks. Yet there are no estimates
of how much greater are the externalities of fruit drinks and
ades than carbonated soft drinks, so there is no basis for
determining the correct taxes. It is also unlikely that differ-
ential taxation across racial/ethnic groups would be legislat-
ed, thus again calling into question the ability of policy-
makers to “correctly” tax beverages for various externalities.

The non-obese Although common sense indicates that not
all soda drinkers are obese or even overweight, a soda tax can-
not differentiate between consumers by their weight. Even
if soda consumption causes obesity, there is no logic to tax-

ing consumers — even excessive ones — who do not have
weight problems.

Moreover, taxes on all soda consumers are likely to exert
differential effects on light vs. heavy demanders. A recent
study finds that taxes on alcohol consumption significantly
lower drinking by light drinkers, but not heavy drinkers.
Thus, taxes dramatically lower consumption of those who
drink relatively little, but exert little to no effect on con-
sumption habits of those individuals who are the targets of
policymakers. There is little reason to suspect anything dif-
ferent in the case of soda taxes.

Soda tax hikes are also unlikely to be large enough to sig-
nificantly lower the weight of the population. A recent paper
by Jason Fletcher et al. examined how state tax rate changes
from 1990 to 2006 affected body mass index. They found that
a one percentage point increase in the tax rate was associat-
ed with a decrease of just 0.003 points in body mass. Thus,
even a large tax increase is unlikely to exert much effect on
population weight. The authors concluded, for example, that
a 58 percent tax on soda, equivalent to the average federal and
state tax on cigarettes, would drop the average body mass by
only 0.16 points — a trivial effect given that obesity is defined
as a body mass index of at least 30. Thus, it is most unlikely
that taxes could be raised enough to transform the obese into
much slimmer people.

Substitution Unintended consequences of government inter-
vention arise whether or not its advocates wish to acknowl-
edge them. Economic theory demonstrates that taxes focused
on one product, such as soda, will lead consumers to purchase

substitutes. What beverages and food consumers would
switch to and what the social effects of that change would be
are not known.

Soda tax advocates seem to believe that a soda tax will lead
to more water and diet drink consumption, but it is likely that
substitutions into other products with caloric properties
similar to soda will arise, with overall effects on weight
unknown. Moreover, a supply of new drink choices is likely
to emerge that creatively circumvents the new taxes, thus
again muting intended reductions in sugar consumption.

Examples of unintended consequences of interventions
abound. A 2004 study by M. C. Farrelly et al. and a 2006
study by J. Adda and F. Cornaglia both indicate that tax hikes
on cigarettes have led smokers to switch to higher tar and nico-
tine brands so that they can maintain chemical intake levels
as they smoke less, to the detriment of their health. A 2001

study by John DiNardo and Thomas Lemieux found that
teen marijuana consumption rose following state tax increas-
es on beer. A 2004 study by S.-Y. Chou et al. found that high-
er cigarette prices, which reduce smoking, are associated with
higher rates of obesity.

Recent research suggests a few of the unintended conse-
quences of soda taxes. Some consumers will likely switch to
diet sodas, but some researchers worry that the health effects
of artificial sweeteners may be worse than those of regular
sugar. A recent study by Gideon Yaniv et al. concludes that a
tax on junk food (including soda) could increase obesity as it
leaves less time for exercise, especially among physically active
people, when it leads them to spend more time shopping for
fresh ingredients and preparing food at home.

Other causes of obesity Recent economic research indi-
cates that factors other than soda are probable causal factors
of obesity. A 2003 study by Tomas Philipson and Richard
Posner finds that technological change has reduced the
demands for heavy labor and thus created a more sedentary
workforce prone to weight gain. Another 2003 study by David
Cutler et al. points out that improvements in food-storage
technology have reduced the time cost of preparing meals,
which leads to more food and beverage consumption. Finally,
huge innovations in medical technology that include treat-
ment of obesity-related illnesses have arisen that lessen health-
related costs of obesity. As a result, some people have become
less concerned about their weight. It remains unclear how a
soda tax would overturn any of these factors that contribute
to weight gain.

Recent economic research indicates that
factors other than soda consumption are

probable causal factors of obesity

CONCLUSION

We have argued that soda taxes are unlikely to correct for any
real or imagined problems related to our nation’s obesity rate.
It is not only unclear that soda causes obesity, but even if it did,
policymakers have neither the technical expertise nor politi-
cal courage to set taxes that correct any externality problems.

Even if policymakers did have such expertise, soda taxes
would likely be regressive, as lower-income households spend
a greater share of their income on soda than higher-income
households. As such, soda taxes would disproportionately fall
on the poor — soda drinkers who may or may not be obese.
If non-obese individuals truly pay some of the higher health
care costs of the obese, the best solution would be to correct
this negative externality through imposing surcharges on
health insurance premiums of the obese.

H E A L T H & M E D I C I N E

Diversion of funds Despite good intentions or political
promises to the contrary, past efforts to fund prevention
programs often fund very little of those programs. Tobacco
control is a clear example of where promises failed to meet
practice. It has been estimated that no more than 10 cents on
the dollar of funds from the 1998 Master Settlement
Agreement with tobacco companies have been spent on tobac-
co control programs, despite promises that a majority of the
funds would be aimed at smoking prevention. Given the cur-
rent fiscal imbalances at the state and federal levels, increased
tax revenues generated through soda taxes would surely have
a similar fate. Moreover, spending on tobacco control has been
shown to exert trivial effects on cigarette consumption, thus
calling into question the effectiveness of public spending on
obesity prevention efforts.

38 REGULATION FA L L 2 0 1 0

n “Alcohol, Marijuana, and American Youth:
The Unintended Consequences of
Government Regulation,” by John DiNardo
and Thomas Lemieux. Journal of Health
Economics, Vol. 20 (November 2001).

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Results from the Behavioral Risk Factor
Surveillance System,” by S.-Y. Chou, M.
Grossman, and H. Saffer. Journal of Health
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n “Annual Medical Spending Attributable To
Obesity: Payer- and Service-Specific
Estimates,” by Eric A. Finkelstein, Justin G.
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Concern,” by David S. Ludwig. JAMA, Vol.
302, No. 22 (December 2009).

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by Arthur Garson and Carolyn L. Engelhard.
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and Nathan Tefft. Contemporary Economic
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with Underweight, Overweight, and Obesity,”
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in Beverages May Play a Role in the Epidemic
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Nutrition and Health: A Systematic Review
and Meta-Analysis,” by Lenny R. Vartanian,
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n “Is the CDC Blowing Smoke?” by Michael L.
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Consumption and Obesity: The Need for
Solid Evidence on a Fluid Issue,” by David B.
Allison and Richard D. Mattes. JAMA, Vol.
301, No. 3 (2009).

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Case for Taxes on Sugared Beverages,” by
Kelly D. Brownell and Thomas R. Frieden.
New England Journal of Medicine, April 30,
2009.

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R e a d i n g s

Perspective

The NEW ENGLAND JOURNAL of MEDICINE

april 30, 2009

1805n engl j med 360;18 nejm.org april 30, 2009

The obesity epidemic has in-
spired calls for public health

measures to prevent diet-related
diseases. One controversial idea is
now the subject of public debate:
food taxes.

Forty states already have small
taxes on sugared beverages and
snack foods, but in the past year,
Maine and New York have pro-
posed large taxes on sugared bev-
erages, and similar discussions
have begun in other states. The
size of the taxes, their potential
for generating revenue and reduc-
ing consumption, and vigorous
opposition by the beverage indus-
try have resulted in substantial

controversy. Because excess con-
sumption of unhealthful foods
underlies many leading causes of
death, food taxes at local, state,
and national levels are likely to
remain part of political and pub-
lic health discourse.

Sugar-sweetened beverages
(soda sweetened with sugar, corn
syrup, or other caloric sweeteners
and other carbonated and uncar-
bonated drinks, such as sports
and energy drinks) may be the
single largest driver of the obe-
sity epidemic. A recent meta-
analysis found that the intake of
sugared beverages is associated
with increased body weight, poor

nutrition, and displacement of
more healthful beverages; in-
creasing consumption increases
risk for obesity and diabetes; the
strongest effects are seen in stud-
ies with the best methods (e.g.,
longitudinal and interventional
vs. correlational studies); and in-
terventional studies show that re-
duced intake of soft drinks im-
proves health.1 Studies that do not
support a relationship between
consumption of sugared bever-
ages and health outcomes tend to
be conducted by authors support-
ed by the beverage industry.2

Sugared beverages are market-
ed extensively to children and
adolescents, and in the mid-1990s,
children’s intake of sugared bev-
erages surpassed that of milk. In
the past decade, per capita intake
of calories from sugar-sweetened
beverages has increased by nearly
30% (see bar graph)3; beverages
now account for 10 to 15% of the

Ounces of Prevention — The Public Policy Case for Taxes
on Sugared Beverages
Kelly D. Brownell, Ph.D., and Thomas R. Frieden, M.D., M.P.H.

Sugar, rum, and tobacco are commodities which
are nowhere necessaries of life, which are become
objects of almost universal consumption, and which
are therefore extremely proper subjects of taxation.

Adam Smith, The Wealth of Nations, 1776

Copyright © 2009 Massachusetts Medical Society. All rights reserved.
Downloaded from www.nejm.org on April 9, 2010 . For personal use only. No other uses without permission.

PERSPECTIVE

1806 n engl j med 360;18 nejm.org april 30, 2009

calories consumed by children
and adolescents. For each extra
can or glass of sugared beverage
consumed per day, the likelihood
of a child’s becoming obese in-
creases by 60%.4

Taxes on tobacco products have
been highly effective in reducing
consumption, and data indi-
cate that higher prices also
reduce soda consumption. A
review conducted by Yale
University’s Rudd Center for
Food Policy and Obesity sug-
gested that for every 10% in-
crease in price, consumption
decreases by 7.8%. An indus-
try trade publication report-
ed even larg er reductions: as
prices of carbonated soft
drinks increased by 6.8%,
sales dropped by 7.8%, and as
Coca-Cola prices increased by
12%, sales dropped by 14.6%.5
Such studies — and the econom-
ic principles that support their
findings — suggest that a tax on
sugared beverages would encour-
age consumers to switch to more
healthful beverages, which
would lead to reduced caloric in-
take and less weight gain.

The increasing affordability
of soda — and the decreasing af-
fordability of fresh fruits and veg-
etables (see line graph) — proba-
bly contributes to the rise in
obesity in the United States. In
2008, a group of child and health
care advocates in New York pro-
posed a one-penny-per-ounce ex-
cise tax on sugared beverages,
which would be expected to re-
duce consumption by 13% —
about two servings per week per
person. Even if one quarter of the
calories consumed from sugared
beverages are replaced by other
food, the decrease in consump-
tion would lead to an estimated
reduction of 8000 calories per

person per year — slightly more
than 2 lb each year for the aver-
age person. Such a reduction in
calorie consumption would be ex-
pected to substantially reduce the
risk of obesity and diabetes and
may also reduce the risk of heart
disease and other conditions.

Some argue that government
should not interfere in the mar-
ket and that products and prices
will change as consumers demand
more healthful food, but several
considerations support govern-
ment action. The first is exter-
nality — costs to parties not di-
rectly involved in a transaction.
The contribution of unhealthful
diets to health care costs is al-
ready high and is increasing —
an estimated $79 billion is spent
annually for overweight and obe-
sity alone — and approximately
half of these costs are paid by
Medicare and Medicaid, at taxpay-
ers’ expense. Diet-related diseas-
es also cost society in terms of
decreased work productivity, in-
creased absenteeism, poorer school
performance, and reduced fitness
on the part of military recruits,
among other negative effects.

The second consideration is in-
formation asymmetry between
the parties to a transaction. In

the case of sugared beverages,
marketers commonly make health
claims (e.g., that such beverages
provide energy or vitamins) and
use techniques that exploit the
cognitive vulnerabilities of young
children, who often cannot dis-
tinguish a television program

from an advertisement.
A third consideration is

revenue generation, which can
further increase the societal
benefits of a tax on soft
drinks. A penny-per-ounce ex-
cise tax would raise an esti-
mated $1.2 billion in New
York State alone. In times of
economic hardship, taxes that
both generate this much rev-
enue and promote health are
better options than revenue
initiatives that may have ad-
verse effects.

Objections have certainly
been raised: that such a tax
would be regressive, that food
taxes are not comparable to to-
bacco or alcohol taxes because
people must eat to survive, that
it is unfair to single out one type
of food for taxation, and that
the tax will not solve the obesity
problem. But the poor are dis-
proportionately affected by diet-
related diseases and would derive
the greatest benefit from reduced
consumption; sugared beverages
are not necessary for survival;
Americans consume about 250 to
300 more calories daily today
than they did several decades ago,
and nearly half this increase is
accounted for by consumption of
sugared beverages; and though
no single intervention will solve
the obesity problem, that is hard-
ly a reason to take no action.

The full impact of public poli-
cies becomes apparent only after
they take effect. We can estimate
changes in sugared-drink con-

Ounces of Prevention — The Public Policy Case for Taxes on Sugared Beverages

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36018

D
ai

ly
C

al
or

ic
In

ta
ke

fr
om

S
ug

ar
–

Sw
ee

te
ne

d
D

ri
nk

s
in

th
e

U
.S

. 2

100

125

175

200

141

190

1977–78 1994–96 1990–2000

Daily Caloric Intake from Sugar-Sweetened Drinks
in the United States.

Data are from Nielsen and Popkin.3

Copyright © 2009 Massachusetts Medical Society. All rights reserved.
Downloaded from www.nejm.org on April 9, 2010 . For personal use only. No other uses without permission.

PERSPECTIVE

1807n engl j med 360;18 nejm.org april 30, 2009

sumption that would be prompt-
ed by a tax, but accompanying
changes in the consumption of
other foods or beverages are more
difficult to predict. One question
is whether the proportions of
calories consumed in liquid and
solid foods would change. And
shifts among beverages would
have different effects depending
on whether consumers substi-
tuted water, milk, diet drinks, or
equivalent generic brands of sug-
ared drinks.

Effects will also vary depend-
ing on whether the tax is de-
signed to reduce consumption,
generate revenue, or both; the size
of the tax; whether the revenue
is earmarked for programs relat-
ed to nutrition and health; and
where in the production and dis-
tribution chain the tax is applied.
Given the heavy consumption of
sugared beverages, even small
taxes will generate substantial
revenue, but only heftier taxes will
significantly reduce consumption.

Sales taxes are the most com-
mon form of food tax, but be-
cause they are levied as a per-
centage of the retail price, they
encourage the purchase of less-
expensive brands or larger con-
tainers. Excise taxes structured
as a fixed cost per ounce provide
an incentive to buy less and hence
would be much more effective in
reducing consumption and im-
proving health. In addition, man-
ufacturers generally pass the cost
of an excise tax along to their
customers, including it in the
price consumers see when they
are making their selection, where-
as sales taxes are seen only at
the cash register.

Although a tax on sugared
beverages would have health ben-
efits regardless of how the reve-
nue was used, the popularity of
such a proposal increases great-
ly if revenues are used for pro-
grams to prevent childhood obe-
sity, such as media campaigns,
facilities and programs for phys-

ical activity, and healthier food in
schools. Poll results show that
support of a tax on sugared bev-
erages ranges from 37 to 72%; a
poll of New York residents found
that 52% supported a “soda tax,”
but the number rose to 72% when
respondents were told that the
revenue would be used for obe-
sity prevention. Perhaps the most
defensible approach is to use rev-
enue to subsidize the purchase
of healthful foods. The public
would then see a relationship be-
tween tax and benefit, and any
regressive effects would be coun-
teracted by the reduced costs of
healthful food.

A penny-per-ounce excise tax
could reduce consumption of sug-
ared beverages by more than 10%.
It is difficult to imagine produc-
ing behavior change of this mag-
nitude through education alone,
even if government devoted mas-
sive resources to the task. In con-
trast, a sales tax on sugared drinks
would generate considerable rev-

Ounces of Prevention — The Public Policy Case for Taxes on Sugared Beverages

3x col

AUTHOR:

FIGURE

JOB: ISSUE:

4-C
H/T

RETAKE 1st

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SIZE

ICM

CASE

EMail Line
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Please check carefully.

REG F
3rd

Enon
ARTIST:

Brownell

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04-30-09

36018

Pr
ic

e
In

de
x

(1
98

2–
19

84
=

10
0)

350

100

150

200

250

300

Fresh fruits and
vegetables

Consumer-price index

Sugar and sweets

Carbonated drinks

19
79

19
81

19
83

19
85

19
89

19
91

19
93

19
95

19
99

20
01

20
03

20
05

20
07

20
09

19
97

19
87

Relative Price Changes for Fresh Fruits and Vegetables, Sugars and Sweets, and Carbonated Drinks, 1978–2009.

Data are from the Bureau of Labor Statistics and represent the U.S. city averages for all urban consumers in January of each year.

PERSPECTIVE

1808 n engl j med 360;18 nejm.org april 30, 2009

enue, and as with the tax on to-
bacco, it could become a key tool
in efforts to improve health.

No potential conflict of interest relevant
to this article was reported.

Dr. Brownell is a professor and director of
the Rudd Center for Food Policy and Obe-
sity, Yale University, New Haven, CT. Dr.
Frieden is the health commissioner for the
City of New York.

This article (10.1056/NEJMp0902392) was
published at NEJM.org on April 8, 2009.

Vartanian LR, Schwartz MB, Brownell 1.
KD. Effects of soft drink consumption on
nutrition and health: a systematic review
and meta-analysis. Am J Public Health
2007;97:667-75.

Forshee RA, Anderson PA, Storey ML. 2.
Sugar-sweetened beverages and body mass
index in children and adolescents: a meta-
analysis. Am J Clin Nutr 2008:87:1662-71.

Nielsen SJ, Popkin BM. Changes in bever-3.
age intake between 1977 and 2001. Am J Prev
Med 2004;27:205-10. [Erratum, Am J Prev Med
2005;28:413.]

Ludwig DS, Peterson KE, Gortmaker SL. 4.
Relation between consumption of sugar-
sweetened drinks and childhood obesity:
a prospective, observational analysis. Lancet
2001;357:505-8.

Ounces of Prevention — The Public Policy Case for Taxes on Sugared Beverages

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