Cheap Donuts, Expensive Broccoli and Soda Taxes

Cite this Article
Joshua D. Wright, Cheap Donuts, Expensive Broccoli and Soda Taxes, Truth on the Market (June 17, 2011),

David Leonhardt’s NY Times column laments the fact that the price of healthful foods has increased relative to unhealthful foods.   He presents this useful chart:

The fact that relative prices have changed is often invoked in support of various “fat taxes,” e.g. consider the recent salvo of proposed soda taxes (For example, here and here).   Or consider the claim of Kelly Brownell (Yale) and Thomas Frieden  in the New England Journal of Medicine that “Sugar-sweetened [beverages] … may be the single largest driver of the obesity epidemic.”  Really?  That would be a pretty impressive claim if true.  But its not.  What do the data really say?  For starters, and on a more general level, consider the research by Gelbach, Klick and Strattman (which inspired the title of this post), which concludes that “relative price changes can only explain about 1 percent of the growth in BMI and the incidence of being overweight or obese over this period” and that  ” a 100 percent tax on unhealthful foods could reduce average BMI by about 1 percent, and the same tax could reduce the incidence of being overweight and the incidence of obesity by 2 percent and 1 percent respectively.”   It should also be pointed out that there are also some significant social benefits that flow from low prices of calorie dense food.

More recently, Klick and Helland have looked at the evidence on soda taxes and obesity more directly.   One of the problems here from an empirical perspective is that one must account for substitution toward other calorie dense beverages when the price of soda increases.  There are others.  Its a nice, accessible piece in Regulation on the various studies in this area: what they find, what data they use, their methodologies, and what the evidence actually says and what it cannot.  I encourage readers interested in this policy area to read it (as well as the underlying studies).  Here is how Klick and Helland conclude:

While politicians at all levels of government in the United States have been drawn to soda taxes as a way to both raise money and fight obesity, the evidence suggests that taxes may in fact do neither. Yes, individuals do seem to be price sensitive when it comes to soda and other sugar-sweetened beverages.  That implies, however, that any increase in tax rates will be offset largely by declining demand for soda specifically, but not for calorie-rich foods overall. While many public health advocates grab on to any indication of price sensitivity to support taxes as a way to reverse the upward trend of obesity, no study finds that this effect is very large in terms of the ultimate effect on body weight, as individuals substitute to consuming other calorie-dense beverages, adjust their eating habits in ways that have little net effect on BMI, or generally undo the positive effects of reduced soda consumption.

Keep that in mind the next time you hear a claim that a soda tax is likely to cause a significant reduction in obesity.