A recent New York Times article says the debate over a tax on sugary soft drinks is starting to fizz over.
The story quotes President Obama as saying taxing sugary drinks is an idea worth exploring, and that “every study that’s been done about obesity shows that there is as high a correlation between increased soda consumption and obesity.”
A health policy report from the prestigious New England Journal of Medicine (NEJM) came out last week, and its well-respected expert panel of authors—including Kelly Brownell of the Rudd Center for Food Policy and Obesity at Yale University, Walter Willett of the Harvard School of Public Health and Thomas Farley, the New York City health commissioner—conclude that the reasons to proceed with this tax are compelling.
I’d like to take the time to go through the NEJM’s main points:
(Full disclosure: I’m vice president of product development for Herbal Water, where we make organic herb-infused waters that have zero calories and no sugar or artificial ingredients. I’m also a pediatrician and have been promoting good nutrition and healthy lifestyle for many years.)
Sugary drink consumption is rising, as is obesity
The intake of sugary drinks has risen worldwide, practically doubling over the last several decades. At the same time, the evidence showing that sugary drinks and increased body weight are positively correlated is convincing and continues to accumulate. Different study designs, and especially more rigorous studies, show this positive association, and the results casting doubt over this link are for the most part beverage-industry sponsored.
Why would sugary drinks lead to poor health?
The most obvious mechanism is weight gain—obesity is a risk factor for heart disease, diabetes, hypertension, some cancers and many other diseases. Sugar in liquid form has poor satiating properties and several studies cited in the report show how sugary drinks’ calories don’t seem to be registered by our body.
High intake of added refined sugars have known adverse physiological and metabolic effects, including elevation of triglyceride levels, elevation of blood pressure and lowering of high-density lipoprotein (HDL) cholesterol levels—all of which are risk factors for heart disease.
The high glycemic load of sugary drinks would be expected to increase the risk of diabetes by causing insulin resistance and also through direct effects on pancreatic islet cells. (Glycemic load is a measure of the effect of carbohydrates in the food on blood sugar levels. Simple carbohydrates—such as table sugar and high fructose corn syrup—break down quickly during digestion, releasing glucose rapidly into the bloodstream.)
Economic rationale to taxing sugary drinks
The report authors write, “Economists agree that government intervention in a market is warranted when there are ‘market failures’ that result in less-than-optimal production and consumption,” and say that there are several “market failures” when it comes to sugary drinks:
• Lack of information and misinformation: The public doesn’t always know the health consequences of sugary drinks, especially given extensive marketing campaigns that advertise the benefits of drinking these calorie-laden drinks.
• “Time-inconsistent” preferences: The short-term reward of the sugary drink (instant gratification) trumps the long-term harm, especially in the eyes of kids.
• “Financial externalities": Consumers do not bear the true cost of sugary drinks. The drink itself is cheap, but its true cost is very expensive in medical costs. For example, medical costs associated with overweight conditions and obesity are estimated at $147 billion a year, half of which are tax-payer dollars.
The proposed tax and its projected effects:
The authors propose an excise tax of one cent per ounce for beverages that have any added caloric sweetener, and suggest levying the tax on producers and wholesalers, who will pass it on to consumers. Such a tax would increase the price of a 20 oz. bottle of sugary drinks by 15-20 percent, and studies suggest the price hike will result in about a 10-percent reduction in consumption of these drinks. Higher taxes would result in even more reductions in intake.
The authors do not propose taxing non-caloric sweeteners (diet) drinks at this point.
The revenue is projected to be considerable— one cent per ounce would raise $14.9 billion in the first year—and could help fund childhood nutrition programs, obesity-prevention programs and health-care for the uninsured.
Objections, industry reactions and growing public support
A tax on sugary drinks would be regressive. To this valid argument the authors reply that “The poor are most affected by illnesses that are related to unhealthful diets, and brand loyalties for beverages tend to be set by the teenage years. In addition, sugar-sweetened beverages are not necessary for survival, and an alternative (i.e., water) is available at little or no cost; hence, a tax that shifted intake from sugar-sweetened beverages to water would benefit the poor both by improving health and by lowering expenditures on beverages. Designating revenues for programs promoting childhood nutrition, obesity prevention, or health care for the uninsured would preferentially help those most in need.”
Another objection often made is that the tax would not solve the obesity crisis. The authors argue that taxing sugary drinks has to be only part of the plan to combat obesity, but that even a 1-2 percent reduction in caloric intake will have an effect on our health.
The industry reaction to the proposed taxes has been—as expected—strong and clever. The article states that: “PepsiCo threatened to move its corporate headquarters out of New York when the state considered implementing an 18 percent sales tax on sugar-sweetened beverages.” It also alerts us to the devious ways in which the beverage industry is fighting the proposed bills: for example, the beverage industry has created front groups, whose name suggests community involvement, such as Americans Against Food Taxes. Be aware!
But according to this paper, public support is not behind the beverage industry, and the trends are in the opposite direction—public support for a tax on high calorie low-nutrition foods and beverages to address obesity is on the rise.
The authors conclude:
The federal government, a number of states and cities, and some countries (e.g., Mexico) are considering levying taxes on sugar-sweetened beverages. The reasons to proceed are compelling. The science base linking the consumption of sugar-sweetened beverages to the risk of chronic diseases is clear. Escalating health care costs and the rising burden of diseases related to poor diet create an urgent need for solutions, thus justifying government's right to recoup costs.
As with any public health intervention, the precise effect of a tax cannot be known until it is implemented and studied, but research to date suggests that a tax on sugar-sweetened beverages would have strong positive effects on reducing consumption. In addition, the tax has the potential to generate substantial revenue to prevent obesity and address other external costs resulting from the consumption of sugar-sweetened beverages, as well as to fund other health-related programs. Much as taxes on tobacco products are routine at both state and federal levels because they generate revenue and they confer a public health benefit with respect to smoking rates, we believe that taxes on beverages that help drive the obesity epidemic should and will become routine.
I wrote about this volatile subject a few months ago, and made my arguments for considering such a tax. I’m glad to see the discussion heating up. Whether the tax is implemented or not, the discussion will, at the very minimum, make more people aware of the body of evidence linking sugary drinks to obesity and adverse health outcomes. The consumption of these drinks will continue to drop because consumers are smart enough to give up the liquid candy habit regardless of price once they know the facts.
Your thoughts, as always, are very welcome.