Taxes on sweetened beverages bring net economic benefits to lower-income communities

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July 8, 2022

A new study from the University of Washington found that taxes on sweetened beverages reallocated dollars from higher-income households to lower-income householdsPixabay

Sugar-sweetened beverages are known to contribute to several health problems, including poor diet, weight gain and diabetes. While several studies have shown that taxing sweetened beverages significantly reduces purchases, questions have been raised as to whether the taxes place a greater economic burden on low-income households.

New research from the University of Washington, published June 2 in Food Policy, addressed the issue by examining the impact of taxes on sweetened beverages on economic equity in three cities: Seattle, San Francisco and Philadelphia.

“Sugar-sweetened beverages are the new tobacco,” said James Krieger, senior author and clinical professor of health systems and population health at the UW School of Public Health. “Public health researchers and others have been working to reduce the sale of these drinks for some time. Taxes have worked well to reduce tobacco purchases and have been applied and appear to work just as well on sugary drinks.”

The study showed that taxes paid by households made up a larger share of income for low-income households, but still only 0.01% to 0.05%. The annual per capita dollar amount that households paid for the tax, ranging from $5.50 to $31, did not differ by income level.

The researchers also found that taxes on sweetened beverages redistributed dollars from higher-income households to lower-income households. More dollars went to fund programs that benefit lower-income communities than to those households that had to pay taxes. Annual net benefits to lower-income communities ranged from $5.3 million to $19.1 million per year across the three US cities.

“Cities have prioritized subsidy programs that benefit lower-income populations, making sweetened beverage tax policies more economically equitable,” Krieger said.

For example, Seattle’s sweetened beverage tax revenue has been used to fund programs and services that increase access to healthy food and support children’s early childhood health and learning. In 2020, sweetened beverage tax revenues were also used to support communities that have been disproportionately affected by the COVID-19 pandemic.

The researchers examined the volume of in-store beverage purchases from 1,141 households in the three US cities to estimate the taxes paid by the households in the first year after the tax was introduced. They then used the cities’ population data to calculate the per capita amount of the sweetened beverage tax by income level.

The authors also reviewed public documents and contacted city officials to determine the amount of annual tax revenue in dollars and the amount invested in programs benefiting low-income communities.

“Right now, there aren’t many studies that look at actual household purchases of these taxed beverages,” said co-lead author Melissa Knox, associate teaching professor of economics at UW. “They’re mainly looking at data at the retail level. But you don’t know what people are doing at the household level. They could go to another city to buy their sweetened beverages and bring them back to Seattle. This study captures all of that. We only look at the households that live in those cities and all of their purchases.”

The study shows that taxes on sweetened beverages “can be an economically progressive policy,” Krieger said. Seven local jurisdictions in the United States, the Navajo Nation, and at least 45 other nations have introduced taxes on sweetened beverages.

“These taxes selectively and specifically benefit lower-income people to a greater extent than higher-income people because the money collected from taxes goes to programs that serve lower-income communities,” Krieger said. “It’s from an economic point of view.

“Taxes also benefit people with lower incomes because they increase consumption and reduce sales for this segment of the population. People will consume less of an unhealthy product and be healthier as a result. It’s a win for health, it’s a win for the wallet and it’s a win for their communities.”

Jessica Jones-Smith, associate professor of health systems and population health and epidemiology at UW, was corresponding author and co-principal investigator.

Other co-authors from UW were Lina Walkinshaw, clinical educator for health systems and population health; Deven Hamilton, senior research scientist at the Center for Demographic and Ecological Studies; Philip Hurvitz, associate professor of urban design and planning; and John Schoof, who recently completed his Masters in Epidemiology. Norma Coe, an associate professor at the University of Pennsylvania Perelman School of Medicine, was also a co-author.

The study was funded by the Robert Wood Johnson Foundation’s Healthy Eating Research Program with partial support from a NICHD grant to the Center for Studies in Demography and Ecology at the University of Washington.

For more information please contact James Krieger at [email protected] and Melissa Knox [email protected].

Keyword(s): Center for Demographic and Ecological Studies • College of Arts and Sciences • School of Economics • School of Urban Design and Planning • Deven Hamilton • Health Systems and Population Health • Jessica Jones-Smith • Jim Krieger • Lina Walkinshaw • Melissa Knox • Philip Hurvitz • Public Health School


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