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Rudd Radar

Taxing Calories in Sugar-Sweetened Beverages May Reduce Consumption of Beverage Calories

June 2, 2014

A .04 cent per-calorie tax on sugar-sweetened beverages would reduce consumption by 5,800 calories per person annually and could do so at a lower cost to consumers than an ounce-based tax, according to a study published online by the American Journal of Agricultural Economics.

"This study adds yet more evidence that changing beverage prices is an effective way to shift calorie consumption from sugary drinks,” according to Marlene Schwartz, PhD, Rudd Center’s Director. “As taxes around the country are enacted - based on ounces, calories, or grams of sugar - researchers will be able to study how each works. The take home message from this study is that a variety of pricing strategies can be used to incentivize healthier choices. The worst thing we can do is leave things the way they are." 

Compared with a hypothetical ounce-based tax that also achieves a 5,800 calorie reduction, the 0.04 cent tax is estimated to save consumers $736 million per year nationwide. This estimation does not take into account the possible response from the beverage and grocery retail industries that could offset potential consumer savings.

A calorie-based sugar-sweetened beverage tax changes the relative price of all sugar-sweetened beverages, allowing consumers to choose from a wide selection of products at a variety of price points. When a .04 cent per-calorie tax is applied, consumers are likely to substitute for a lower-calorie beverage; however, when a comparable half-cent per-ounce tax is applied, consumers are likely to substitute for a less expensive, but potentially equal- or higher-calorie beverage.

The latest study highlights how a variety of pricing strategies can be used to incentivize healthier choices by consumers. Previous research has shown that a 20 percent (within the range of one to two cents per ounce) increase in the price of sugar-sweetened beverages is estimated to reduce consumption by 24 percent.

The Robert Wood Johnson Foundation funded the study through its Healthy Eating Research national program.