Can a simple tax change the way we drink?
In short: From Mexico to Philadelphia, governments are using fiscal policy to combat rising rates of diabetes and obesity. While some taxes successfully drop consumption, others face intense industry opposition or lead consumers to simply shop across borders, potentially reducing the intended health benefits of these targeted beverage surcharges.
A sugary drink tax, or sweetened beverage tax (SBT), is a policy designed to make sweetened drinks more expensive, thereby reducing consumption. Proponents, including the World Health Organization, view this as a Pigouvian tax—a tool to offset the economic and health costs of obesity and type 2 diabetes. In 2015 alone, diabetes caused an estimated 1.6 million deaths globally. The health stakes are high: studies suggest consuming one to two sugary drinks daily can increase diabetes risk by 26%, and for men, each additional daily serving is associated with a 19% increased risk of heart disease.
The design of these taxes varies significantly. Most are volumetric, meaning they charge a constant rate per unit of liquid. However, critics argue this is poorly targeted, as only three such taxes worldwide are proportional to actual sugar content. A shift toward taxing sugar mass rather than volume could potentially boost health and economic gains by roughly 30%. Other methods include indirect taxes like VAT or sales tax, which are paid by the consumer at purchase. Some jurisdictions, like France, apply taxes to both regular and diet soft drinks, while others exclude fruit juices despite their high sugar content.
The impact of these policies is often a tug-of-war between health benefits and economic side effects. In Mexico, a 10% tax enacted in 2014 reduced consumption by 12% after one year. Conversely, Philadelphia saw a 46% drop in sales within the city, but only a 22% drop overall when accounting for cross-border shopping. Critics also highlight the regressive nature of these taxes, noting that lower-income consumers spend a larger proportion of their income on them. However, advocates argue the tax is progressive in its health benefits and potential to subsidize healthier foods like fruits and vegetables.
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Sources
- Summary by Intellect · source: Sugary drink tax
- Also: Nutrients — Consumption of Sugary Beverages by Adults Prior to Sugary Drink Tax in Colombia: An Analysis of the National Nutrition Survey 2015. · CC BY
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