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USDA Study: Taxing or Increasing Cost of Sugary Beverages Can Lower Obesity Rates

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A United States Department of Agriculture (USDA) study, “Measuring Weight Outcomes for Obesity Intervention Strategies: The Case of Sugar-Sweetened Beverages,” has found that increasing the price of sugary drinks by 20 percent would reduce the consumption of those beverages by 20 percent. These price-sensitive drinks generally lack any nutritive value and are associated with the alarming rates of obesity in this country. The USDA study found that, when the price of sugar-sweetened beverages (SSBs) increases due to taxes or subsidies, weight loss can occur—as long as higher-priced SSBs are replaced by zero calorie beverages, like water, or lower-calorie options, like low-fat milk.

According to the Centers for Disease Control and Prevention, SSBs are the largest source of added sugars in the diets of American youth. And in adult Americans, even diet soda is linked with weight gain.

Governments are starting to reduce the availability of SSBs in the communities they represent. On June 3, New York City Mayor Michael Bloomberg proposed a ban on the sale of soda in portion sizes over 16 ounces. This ban could take effect in the city’s restaurants, delis, sporting arenas, food trucks, and movie theaters as early as March 2013.

When Bloomberg made his announcement, he cited obesity as the only public health crisis in this country that is worsening and, in the wake of public criticism over the proposed ban, identified obesity as second only to smoking as the leading cause of preventable death in the United States. According to the mayor’s office, an estimated 5,800 New Yorkers die each year because of obesity, and one in three New Yorkers is either diabetic or pre-diabetic.

A week after Bloomberg’s announcement, the city of Richmond, California proposed a tax in the form of a licensee fee on businesses selling SSBs, including bodegas, movie theaters, and convenience stores. Businesses would also be required to tally ounces of SSBs sold. Revenue from the tax would fund programs aimed at curbing the rates of childhood obesity in Richmond, including bike lanes, nutritional information, and after-school sports activities.

Using revenue generated by taxes on SSBs to fund government exercise and wellness programs might help reverse obesity rates in cities like New York and Richmond, according to Dr. Biing-Hwan Lin, senior economist at the Economic Research Service, USDA and an author of the “Measuring Weight Outcomes” study.

The study summary states: “The allocation of tax revenue for competing budgetary needs is to be determined by Federal, State, and local elected officials.” Lin adds that, “If a soda tax is motivated by the need to alleviate obesity epidemic in the U.S., such tax revenue would provide funding programs to combat obesity, either at Federal, State, or local levels. Weight gain is a result of energy imbalance, which in turn is caused by diet, lifestyle, and the environment. We have to address all major causes of the obesity epidemic to be effective.”

Lin earned a B.S. degree in agricultural economics from National Taiwan University, Taiwan before moving to this country to earn both an M.S. and a PhD in agricultural and resource economics from Oregon State University. He taught at the University of Idaho and the University of Alaska-Fairbanks (UAF), then joined the USDA in 1991. A senior researcher who examines consumers’ food choices, diet quality, and health outcomes, Lin says, “My research addresses issues such as: the roles of economic and non-economic factors in influencing consumers’ food consumption decisions, the relationships between food consumption and diet and health outcomes, and policy levers available to effectively improve our diet, and health.”

According to Lin, “a 20-percent tax on sodas (or 0.5 cent per ounce) would have generated $5.8 billion in revenue in 2007. This estimated revenue represents about 5 percent of the estimated $113.8 billion in U.S. medical costs associated with overweight and obesity.”

Though a tax on SSBs would be regressive, in that the poor would pay a greater percentage of personal income than the rich, the difference would be slight, at just 1 percent vs. 0.6 percent of food spending. And since everyone, rich and poor, would pay a tax on SSBs, this is one lever that could improve the health of residents across economic lines in municipalities where price increases would occur.