Can ‘Soda Taxes’ Improve Our Health?

A new study shows taxes on sugary beverages like soda reduce demand and are likely to improve public health.

Soda is the No. 1 source of added sugar in the American diet. Aside from the tooth decay your mother warned you about, soda and sugar-sweetened tea, fruit, and sports drinks and their added calories increase insulin resistance, obesity, and the risks of diabetes, heart disease, liver cancer, and other chronic disease, research shows. 

That’s in part because sugary beverages have little nutritional value, and sugar in its liquid form can be especially unhealthy because it is so rapidly absorbed into the blood. In a 2019 study of 10 European countries, sugary beverage consumption increased the risk of premature death across all diseases and complications.

To combat the crisis, dozens of countries have taxed the beverages, and though opposition from the American beverage industry is formidable, a handful of U.S. locales have followed suit. 

“Tax and price change gets you to look at your habits and think again, ‘Is this what I want to be doing?’ ” says Michael Long, SD, an associate professor of prevention and community health at George Washington University.

That’s just how it’s designed, Long says. As with tobacco, alcohol, or cannabis, the higher shelf price signals to shoppers that sugary drinks come with a cost to society. 

The new study in The Journal of the American Medical Association found sugar-sweetened beverage (SSB) taxes in five U.S. cities raised soda prices by an average of 33% – roughly $1 per 6-pack – leading to a 33% drop in sales, and shoppers typically did not leave their cities to buy the drinks elsewhere. (The study looked at data from Boulder, CO; Oakland, CA; Philadelphia; San Francisco; and Seattle.)

“This impact was sustained,” says Lisa Powell, PhD, a distinguished professor of health policy and administration at the University of Illinois Chicago. “That’s a very large change in behavior.” 

Still, widespread adoption of the taxes has been elusive. Only the Navajo Nation and the five cities in the study – along with Albany, CA; Berkeley, CA; Cook County, IL; and Washington, DC – have levied some form of tax on sugary drinks. Cook County later repealed its tax. Some states, including Arizona and Michigan, have blocked such taxes, while California and Washington have prohibited cities from levying further taxes.

A national tax seems even more elusive, despite a 2015 study by Long and others predicting a penny-per-ounce national SSB tax would cost little and generate more than $12.5 billion in tax revenue and $23.6 billion in health care savings over a decade, while increasing healthy life expectancy. (Studies in 2012 and 2019 forecast similar results.)

Since 2009 – when the industry successfully fought the Obama administration’s proposed SSB excise tax – beverage companies have spent tens of millions on lobbying efforts. They’ve spent more on campaigns to shift blame for the obesity epidemic away from their products, according to a 2018 study in the Yale Journal of Biology and Medicine.

One of the industry’s favorite arguments is that SSB taxes kill jobs. But Powell says only industry-funded studies have reached that conclusion. Non-industry-funded, peer-reviewed studies have found “no net negative impacts on employment,” she says.

Powell likened it to when people stopped listening to CDs. Jobs were lost in that product sector, she says, but music streaming services created new ones. 

Confronted with an SSB tax, consumers often buy untaxed drinks made by the same beverage companies, Powell says, or they spend savings on other goods and services – not to mention the economic activity generated by the government spending newfound revenue.

“Preferences change all the time,” she says. “The money doesn’t disappear from the economy.” 

Another industry argument is that SSB taxes hit the poor harder. Powell and Long counter that. 

Clearly, lower-income households consume more soda and are more responsive to price changes, they say. But that’s kind of the point: Families that quit buying sugary drinks stand to save money at the grocery store – and the doctor’s office, Long says. 

Beverage companies market dangerously unhealthy drinks and are “putting them everywhere,” even schools and hospitals, Long says. Far from being some sinister plan of “the nanny state,” SSB taxes are a form of appropriate regulation, he says.

“We do need the government to help us achieve our goals as a people and community. The idea we can thrive as a people without any form of collective action is wrong,” Long says. 

Powell concurs. The key takeaway for January’s study is that SSB taxes are “an effective tool for reducing demand,” she says. An excise tax of 1 to 2 cents per ounce would be most effective at a federal level, she says.

“At the end of the day, we have a policy tool that we know is effective in the interest of national public health,” Powell says. 

“The broader the jurisdiction, the better.”