Soda taxes can’t reverse the obesity epidemic

Many public health advocates and scholars see sugar-sweetened-beverage taxes (often simply called soda taxes) as key to reducing obesity and its adverse health effects.

But a careful look at the data challenges this view. We reviewed close to 100 studies that have analyzed current taxes in more than 50 countries and conducted our own research on the effectiveness of soda taxes in the US. There is no conclusive evidence that soda taxes have reduced how much sugar or calories people consume in any meaningful way. Soda taxes alone simply cannot nudge consumers toward healthier food choices.

The World Health Organization estimates that more than 17 million people die prematurely each year from chronic noncommunicable diseases. Being overweight or obese is a major risk factor for many of these conditions, including type 2 diabetes, cardiovascular diseases, asthma and several types of cancer. A widely publicized 2019 Lancet Commission report pegged annual obesity-related health-care costs and economic productivity losses at $2 trillion, about 3 percent of the global gross domestic product.

Consuming large amounts of added sugars is a key part of this problem. A single 12-ounce can of soda can have more than 10 teaspoons of sugar; drinking just one exceeds the American Heart Association’s recommended daily limits on added sugars. It is easy to see why reducing soda consumption has been a popular target in the war against obesity.

One would think that taxing sodas would raise their prices and discourage consumers from purchasing them. With this idea in mind, a wave of taxes has been slapped on sugar-sweetened beverages across the world. For example, cities in California’s Bay Area have imposed a tax of 1 cent per ounce on sugary beverages (a seemingly large price increase given soda’s cost of about 5 cents per ounce in the western US).

Yet even taxes that are portrayed as most effective to date, such as the UK’s Soft Drinks Industry Levy, correlate with a decrease in the average person’s intake of added sugars of only 18 calories (just over a teaspoon) per day. These reductions can be canceled out by consuming just two gummy bears, a single teaspoon of ice cream or two potato chips or fries.

So why have these taxes been so ineffective?

First, it is often assumed that taxes will all be passed on to consumers. This rarely happens. Companies will absorb taxes if passing them along would result in sales decreases that lead to greater financial losses. Our work with our doctoral dissertation student, Hairu Lang, found that on average only about half of local soda taxes in the US are added on to product prices. Purchases change by relatively less than prices, and sales revenue increases. A 10 percent price increase in California’s Bay Area reduces purchases of taxed beverages by 5 to 7 percent, on average.

In the US, soda taxes are implemented in only a handful of cities. Several studies show that consumers just purchase soda in nearby places that don’t have soda taxes. A 2020 study found a stunning 46 percent reduction in sales of taxed beverages in response to Philadelphia’s 1.5-cents-per-ounce tax, but more than half of that sales reduction was offset by cross-border shopping.

Using more recent data, we found much lower average sales reductions in Philadelphia stores (18 to 25 percent), which are further reduced by cross-border shopping. That might still sound like a pretty large reduction in sales, but the impact on sugar consumption is small. And people are not buying healthier drinks instead.

Some people believe that soda taxes can also be an effective tool to address health inequities. Low-income and racially diverse communities tend to consume a lot of sugary beverages and suffer disproportionately from obesity and its associated health concerns. Soda taxes could, in theory, provide an especially helpful nudge toward healthier beverages for these households. But the evidence suggests the opposite. We found that a higher share of the tax is passed forward to consumers in low-income (and more racially diverse) neighborhoods, and that these households respond less to price hikes than people in wealthier neighborhoods. This means that low-income households bear a heavier burden of soda taxes and aren’t experiencing the promised health benefits.

Advocates sometimes counter that the revenue from soda taxes can be redirected into programs that benefit these same households. But surely, such programs can be more directly and equitably funded by repurposing funds collected from income taxes.

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First, soda taxes that are imposed nationwide, instead of locally, minimize cross-border shopping. Second, a tax on sugar content instead of beverage volume (with lower tax rates for less sugary products) incentivizes manufacturers to reduce the sugar added to their drinks. About 80 percent of the measured overall reductions in added sugar purchased in the UK come from manufacturer reformulations rather than from decreased purchases.

Third, policies meant to significantly reduce added sugars or overall calories consumed cannot be effective if they target only a small group of products, like sodas. Broader taxes on sugar added to all kinds of foods and drinks, especially when coupled with subsidies that make heathier alternatives (like fresh fruits and vegetables) cheaper, stand a better chance.

Education campaigns, labeling policies and disclosure requirements could further boost people’s ability to make healthier choices. So far, only a few countries, such as Chile, Peru and Uruguay, inform consumers about the dangers of excessive sugar consumption by putting an obvious, stop-sign-shaped “high in sugar” or “excess sugar” warning label on the front of packages.

We need more research that evaluates which policies, alone or in combination, can more effectively reduce consumption of added sugars. But we already know — despite endorsements by many researchers and policymakers as well as the media attention they have received — that sugar-sweetened-beverage taxes cannot bring about the kinds of behavioral changes needed to reverse obesity trends.