Beverage Taxes Should Be Based on Calories

June 3, 2014 Taxation in USA

Soda taxesWASHINGTON D.C. – Taxes on the sale of sugary soft drinks may help improve health in the USA, but the currently proposed model for the taxes need to be significantly changed in order to be effective.

On June 2nd the US based non-government organization Robert Wood Johnson Foundation issued a statement with the results of new research analyzing the potential effectiveness of various methods of taxing sugar sweetened beverages the USA in terms of their potential impact on consumption and consumer health, and showed that the commonly accepted model of taxing drinks based on their volume is not as effective as taxing drinks based on their caloric content.

The findings were based on an analysis of the purchasing behavior of US consumers, and showed that, as an example, levying a tax at a rate of 0.04 cents per calorie on the sale of all soft drinks would reduce the consumption of such products in the USA by 9.3 percent.

As a result of the flagging demand the average person in America would cut their annual caloric intake by approximately 5 800 calories, and would reduce total national spending on such drinks by USD 736 million per year.

The experts of the Foundation pointed out that the model of taxing based drinks on volume is comparatively ineffective, as the researcher’s modelling showed that applying a 0.05 cents per ounce tax on soft drinks would reduce national consumption by only 8.6 percent.

The difference in the two approaches to taxation was explained by an analysis of consumer psychology, which showed that a volume tax would not provide consumers with any comparative financial benefits for choosing a healthier drink, while a tax on calories would actively encourage buyers to pick the cheaper and less caloric option.

Photo by: dcJohn