Should We Tax Unhealthy Foods and Drinks?

Some cities and nations have enacted taxes on “junk foods,” primarily on sugar-sweetened beverages and energy-dense processed foods, including Denmark, Finland, France, Hungary, Mexico, the Navajo Nation, and the city of Berkeley, California. Although these taxes can influence what people eat and drink, they also have important limits and costs, according to a recent report by the Urban-Brookings Tax Policy Center.

Researchers, led by Donald Marron, PhD, examined the policy of taxing unhealthy foods and drinks in order to reduce the rates of obesity, diabetes, hypertension, and other conditions linked to poor eating habits. The report notes that it is not possible to offer a blanket assessment of whether taxing unhealthy foods and drinks makes sense because of the complexity of different social, cultural, economic, and biologic factors.

Nonetheless, the report examines a wide range of factors that determine the benefits and costs of using taxes to improve nutrition.

• Excess sugar consumption is the health risk that warrants the most attention from policymakers. Health concerns have been raised about fat, saturated fat, salt, and artificial sweeteners, but sugar has been the most consistently identified factor in the rise of obesity, diabetes, and other metabolic health risks. Sugar in drinks may be a particular concern, the report notes, including natural sugars in juices.
• Taxes can change what we eat and drink but the size of the response varies. Consumers appear to find it easier to switch away from sugary drinks than from other foods and drinks.
• Health effects of nutrition-focused taxes depends on all the ways consumption changes, the study points out. It is not enough to focus on reduced consumption of targeted products because sugar reduction could be offset if consumers switch to juice and beer or eat more bread and cookies.
• Taxing sugar content, rather than volume of drinks, is a more effective way to encourage businesses to develop and market healthier drinks with lower sugar content.
• Taxes are an imprecise way to address nutritional concerns because there is not a tight relationship between “dose” taxed and “response” of concern, and other factors contribute to obesity.
• These taxes are regressive, placing a higher burden on lower-income consumers.

The report suggests that policymakers carefully consider how they use tax revenues. Revenues can also be used to subsidize fruits and vegetables, obesity prevention, and assistance to low-income families.

Finally, more study is needed about how taxes change overall diet including food in restaurants, schools, and other locations outside the home. Well-designed taxes can help, but they are a limited tool for a complex challenge.

“Even the best-designed taxes on unhealthy foods and drinks are not a silver bullet, and poorly designed taxes can impose burdens without yielding commensurate health benefits,” the report notes.