Estimating the Potential Impact of Sugar-Sweetened Excise Taxes in ...
Estimating the Potential Impact of Sugar-Sweetened Excise Taxes in ...
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<strong>Estimat<strong>in</strong>g</strong> <strong>the</strong> <strong>Potential</strong> <strong>Impact</strong><br />
<strong>of</strong> <strong>Sugar</strong>-<strong>Sweetened</strong><br />
and O<strong>the</strong>r Beverage<br />
<strong>Excise</strong> <strong>Taxes</strong> <strong>in</strong> Ill<strong>in</strong>ois<br />
October 2011<br />
Frank J. Chaloupka<br />
Y. Claire Wang<br />
Lisa M. Powell<br />
Tatiana Andreyeva<br />
Jamie F. Chriqui<br />
Leah M. Rimkus
October 2011<br />
Executive Summary<br />
Frank J. Chaloupka 1<br />
Y. Claire Wang 2<br />
Lisa M. Powell 1<br />
Tatiana Andreyeva 3<br />
Jamie F. Chriqui 1<br />
Leah M. Rimkus 1<br />
1 Health Policy Center, Institute for Health Research and Policy, University <strong>of</strong> Ill<strong>in</strong>ois at Chicago.<br />
2 Department <strong>of</strong> Health Policy & Management, Mailman School <strong>of</strong> Public Health, Columbia University<br />
3 Rudd Center for Food Policy & Obesity, Yale University.<br />
Over <strong>the</strong> past few decades, obesity rates <strong>in</strong> <strong>the</strong> United States have risen rapidly, with<br />
recent estimates <strong>in</strong>dicat<strong>in</strong>g that more than one-third <strong>of</strong> adults are obese, up from less<br />
than one <strong>in</strong> seven <strong>in</strong> <strong>the</strong> early 1960s, with ano<strong>the</strong>r one-third overweight. Recent estimates<br />
for children and adolescents show that more than one <strong>in</strong> six is obese, more than triple <strong>the</strong><br />
rate <strong>of</strong> <strong>the</strong> early 1970s. Ill<strong>in</strong>ois is experienc<strong>in</strong>g <strong>the</strong> same rise <strong>in</strong> obesity. Between 1995 and<br />
2009, <strong>the</strong> prevalence <strong>of</strong> obesity among Ill<strong>in</strong>ois adults rose by nearly 65 percent, from 16.7<br />
percent to 27.4 percent, with ano<strong>the</strong>r 37.1 percent overweight <strong>in</strong> 2009. Similarly, more<br />
than one <strong>in</strong> five Ill<strong>in</strong>ois youth ages 10 through 17 were obese <strong>in</strong> 2007, and more than one<br />
<strong>in</strong> three were overweight or obese.<br />
The sharp rise <strong>in</strong> obesity has resulted from a change <strong>in</strong> <strong>the</strong> ‘energy balance’ – more calories be<strong>in</strong>g<br />
taken <strong>in</strong> than expended. Many factors have contributed to this imbalance, from <strong>in</strong>creased caloric <strong>in</strong>take<br />
follow<strong>in</strong>g reductions <strong>in</strong> <strong>the</strong> prices <strong>of</strong> energy dense foods and beverages to fewer calories expended as<br />
technological changes reduced physical activity. Among <strong>the</strong>se, <strong>the</strong> parallel rise <strong>in</strong> calories consumed<br />
from sugar sweetened beverages (SSBs) has drawn particular attention. SSBs <strong>in</strong>clude carbonated s<strong>of</strong>t<br />
dr<strong>in</strong>ks, sports dr<strong>in</strong>ks, fruit dr<strong>in</strong>ks, flavored waters, sweetened teas, ready-to-dr<strong>in</strong>k c<strong>of</strong>fees, and o<strong>the</strong>r<br />
non-alcoholic dr<strong>in</strong>ks conta<strong>in</strong><strong>in</strong>g added sugars. One recent study concludes that SSBs account for at least<br />
twenty percent <strong>of</strong> <strong>the</strong> <strong>in</strong>creases <strong>in</strong> weight <strong>in</strong> <strong>the</strong> United States from 1977 through 2007.<br />
The <strong>in</strong>creas<strong>in</strong>g recognition <strong>of</strong> <strong>the</strong> role <strong>of</strong> SSBs <strong>in</strong> contribut<strong>in</strong>g to <strong>the</strong> grow<strong>in</strong>g obesity epidemic has spurred<br />
<strong>in</strong>terest <strong>in</strong> policy and o<strong>the</strong>r <strong>in</strong>terventions that aim to reduce SSB consumption. Given <strong>the</strong> demonstrated<br />
effectiveness <strong>of</strong> <strong>in</strong>creased tobacco taxes <strong>in</strong> reduc<strong>in</strong>g cigarette smok<strong>in</strong>g and o<strong>the</strong>r tobacco product use,<br />
many have proposed SSB taxes that would lead to sizable <strong>in</strong>creases <strong>in</strong> prices as a promis<strong>in</strong>g policy<br />
option for curb<strong>in</strong>g obesity and its health and economic consequences. To date, however, exist<strong>in</strong>g taxes<br />
are mostly small sales taxes that are applied to both sugar-sweetened and diet beverages. In Ill<strong>in</strong>ois,<br />
<strong>the</strong> state’s 6.25 percent sales tax is applied to many beverages, <strong>in</strong>clud<strong>in</strong>g: regular and diet sodas;<br />
juice dr<strong>in</strong>ks conta<strong>in</strong><strong>in</strong>g 50 percent or less real juice; sweetened, ready-to-dr<strong>in</strong>k teas; and sports dr<strong>in</strong>ks<br />
and o<strong>the</strong>r isotonic beverages. Research assess<strong>in</strong>g <strong>the</strong> impact <strong>of</strong> <strong>the</strong> small taxes applied <strong>in</strong> many states<br />
generally f<strong>in</strong>ds that <strong>the</strong>y have modest effects on beverage consumption and a limited impact on weight.<br />
At <strong>the</strong> same time, estimates from <strong>the</strong>se studies suggest that sizable taxes that result <strong>in</strong> large price<br />
<strong>in</strong>creases would, by sharply reduc<strong>in</strong>g SSB consumption, have a substantial impact on <strong>the</strong> prevalence<br />
<strong>of</strong> obesity at <strong>the</strong> population level.<br />
This report was made possible by fund<strong>in</strong>g through <strong>the</strong> Department <strong>of</strong> Health and Human Services:<br />
Communities Putt<strong>in</strong>g Prevention to Work (CPPW) grant. CPPW is a jo<strong>in</strong>t project <strong>of</strong> <strong>the</strong><br />
Cook County Department <strong>of</strong> Public Health and <strong>the</strong> Public Health Institute <strong>of</strong> Metropolitan Chicago.<br />
1
Given <strong>the</strong> potential for SSB taxes to reduce obesity, we use <strong>the</strong> best available data and research-based<br />
evidence to estimate <strong>the</strong> impact <strong>of</strong> alternative beverage taxes <strong>in</strong> Ill<strong>in</strong>ois. Specifically, we consider<br />
four alternative beverage taxes – a one cent per ounce excise tax on SSBs and <strong>the</strong>ir diet versions<br />
(‘all beverages’); a one cent per ounce excise tax on SSBs only; a two cent per ounce excise tax on all<br />
beverages; and a two cent per ounce excise tax on SSBs only. Us<strong>in</strong>g recent data, we predict <strong>the</strong>ir impact<br />
on overall beverage consumption, tax revenues, age and gender-specific frequency <strong>of</strong> SSB consumption,<br />
average daily caloric <strong>in</strong>take, body weight, body mass <strong>in</strong>dex (BMI), obesity prevalence, diabetes<br />
<strong>in</strong>cidence, and health care costs <strong>of</strong> diabetes and obesity. The table below summarizes our estimates.<br />
Table 1<br />
Estimated <strong>Impact</strong> <strong>of</strong> Alternative Beverage <strong>Excise</strong> <strong>Taxes</strong>, Ill<strong>in</strong>ois, 2011<br />
1 Cent - All<br />
1 Cent -<br />
SSBs Only<br />
2 Cents - All<br />
2 Cents -<br />
SSBs Only<br />
Reduction<br />
<strong>in</strong> Number<br />
<strong>of</strong> Obese<br />
Youth (2-17)<br />
Reduction<br />
<strong>in</strong> Number<br />
<strong>of</strong> Obese<br />
Adults (18+)<br />
Reduction<br />
<strong>in</strong> Number<br />
<strong>of</strong> Obese<br />
Ill<strong>in</strong>oisans<br />
Reduction<br />
<strong>in</strong> Diabetes<br />
Incidence<br />
Reduction<br />
<strong>in</strong> Health<br />
Care Costs<br />
<strong>of</strong> Diabetes<br />
(millions)<br />
Reduction<br />
<strong>in</strong> Obesity-<br />
Related<br />
Health Care<br />
Costs (millions)<br />
New Tax<br />
Revenues<br />
(millions)<br />
6.2% 3.5% 123,418 2,294 $13.8 $100.5 $876.1<br />
9.3% 5.2% 185,127 3,442 $20.7 $150.8 $606.7<br />
12.3% 7.0% 246,836 4,591 $27.6 $201.0 $1,419.6<br />
18.5% 10.5% 370,253 6,885 $41.3 $301.6 $839.3<br />
In 2011, we estimate that Ill<strong>in</strong>oisans will consume more than 620 million gallons <strong>of</strong> SSBs, and almost<br />
200 million gallons <strong>of</strong> diet alternatives. We estimate that a one-cent per ounce tax on SSBs only would<br />
lead to about a 23.5 percent drop <strong>in</strong> SSB consumption, while generat<strong>in</strong>g more than$600 million <strong>in</strong> new<br />
revenues. A higher tax would lead to even larger decl<strong>in</strong>es <strong>in</strong> consumption and <strong>in</strong>creases <strong>in</strong> revenues; a<br />
broader based tax on all beverages would have a smaller impact on SSB consumption while generat<strong>in</strong>g<br />
more revenue.<br />
Similarly, <strong>the</strong> reductions <strong>in</strong> SSB consumption that would result from a tax on SSBs will lead to reductions<br />
<strong>in</strong> weight. Us<strong>in</strong>g <strong>the</strong> relatively conservative assumption that half <strong>of</strong> <strong>the</strong> reduction <strong>in</strong> caloric <strong>in</strong>take from<br />
SSBs follow<strong>in</strong>g an SSB tax is <strong>of</strong>fset by <strong>in</strong>creases <strong>in</strong> caloric <strong>in</strong>take from o<strong>the</strong>r sources, we estimate that a<br />
one-cent per ounce tax on SSBs only will reduce average weight among Ill<strong>in</strong>oisans by about 1.7 pounds,<br />
with larger reductions <strong>in</strong> <strong>the</strong> younger and male populations that are heavier consumers. We estimate that<br />
<strong>the</strong>se reductions <strong>in</strong> weight will lead to reductions <strong>in</strong> <strong>the</strong> prevalence <strong>of</strong> obesity <strong>in</strong> Ill<strong>in</strong>ois. For example, we<br />
estimate that a one-cent per ounce tax on SSBs only will reduce obesity prevalence among Ill<strong>in</strong>oisans<br />
two years and older from 25.2 percent to 23.7 percent – a drop <strong>of</strong> over 185,000 <strong>in</strong> <strong>the</strong> number <strong>of</strong> obese<br />
persons <strong>in</strong> <strong>the</strong> state. Almost one-quarter <strong>of</strong> <strong>the</strong> drop – more than 45,000 – would be among children<br />
ages 2 through 17 years. Aga<strong>in</strong>, a higher tax on SSBs would lead to a larger decl<strong>in</strong>e <strong>in</strong> weight and<br />
obesity, while a broader based tax on all beverages would have a smaller impact.<br />
Additionally, given <strong>the</strong> significant costs <strong>of</strong> treat<strong>in</strong>g <strong>the</strong> diseases caused by obesity, we estimate that <strong>the</strong><br />
reductions <strong>in</strong> <strong>the</strong> number <strong>of</strong> obese Ill<strong>in</strong>oisans follow<strong>in</strong>g a tax on SSBs would lead to reduced health care<br />
spend<strong>in</strong>g <strong>in</strong> <strong>the</strong> state. For example, we estimate that a one-cent per ounce tax on SSBs only would reduce<br />
obesity-related health care costs by more than $150 million <strong>in</strong> <strong>the</strong> first year. Given that a sizable share<br />
<strong>of</strong> <strong>the</strong> obesity-related health care costs <strong>in</strong> Ill<strong>in</strong>ois are paid for by publicly funded <strong>in</strong>surance programs, an<br />
SSB tax will not only raise new revenues for <strong>the</strong> state, but it also will reduce state Medicaid spend<strong>in</strong>g.<br />
Given <strong>the</strong> cont<strong>in</strong>ued reduction <strong>in</strong> SSB consumption follow<strong>in</strong>g <strong>the</strong> alternative beverage taxes, <strong>the</strong> impact <strong>of</strong><br />
<strong>the</strong> tax will grow over time as additional new diabetes cases will be prevented and as <strong>the</strong> long term costs<br />
result<strong>in</strong>g from childhood obesity are averted. To <strong>the</strong> extent that a portion <strong>of</strong> <strong>the</strong> new revenues generated<br />
by <strong>the</strong> tax are used to support obesity prevention and reduction programs <strong>in</strong> Ill<strong>in</strong>ois, <strong>the</strong> future decl<strong>in</strong>es <strong>in</strong><br />
obesity prevalence and <strong>the</strong> result<strong>in</strong>g disease and costs will be even larger.<br />
In summary, sizable new SSB taxes would be a w<strong>in</strong>-w<strong>in</strong> for Ill<strong>in</strong>ois – <strong>the</strong>y would generate considerable<br />
new revenues, and lead to reductions <strong>in</strong> SSB consumption, obesity, and <strong>the</strong> result<strong>in</strong>g disease burden<br />
and health care costs. As seen with tobacco tax <strong>in</strong>creases that earmarked a portion <strong>of</strong> new revenues<br />
for comprehensive tobacco prevention and cessation programs that fur<strong>the</strong>r reduced tobacco use and<br />
its consequences, us<strong>in</strong>g <strong>the</strong> same approach with SSB tax revenues would lead to fur<strong>the</strong>r reductions <strong>in</strong><br />
obesity while at <strong>the</strong> same time <strong>in</strong>creas<strong>in</strong>g public support for such taxes.<br />
The <strong>in</strong>creased prices that result from SSB taxes will reduce SSB consumption and its consequences.<br />
Given <strong>the</strong> research demonstrat<strong>in</strong>g that <strong>in</strong>creased SSB consumption leads to an <strong>in</strong>creased risk <strong>of</strong> type 2<br />
diabetes, we estimate <strong>the</strong> impact <strong>of</strong> alternative beverage taxes on <strong>the</strong> <strong>in</strong>cidence <strong>of</strong> diabetes and related<br />
costs. For example, we estimate that a one-cent per ounce tax on SSBs only would prevent nearly 3,500<br />
new cases <strong>of</strong> type 2 diabetes <strong>in</strong> 2011, reduc<strong>in</strong>g health care costs by more than $20 million. Higher taxes<br />
would lead to larger reductions <strong>in</strong> <strong>the</strong> <strong>in</strong>cidence <strong>of</strong> type 2 diabetes and <strong>the</strong> result<strong>in</strong>g costs <strong>of</strong> treat<strong>in</strong>g it,<br />
while a broader based tax would have a smaller impact.<br />
2 3
Section I<br />
Introduction<br />
U.S. obesity rates have risen rapidly over <strong>the</strong> past several decades. By 2007-08, more<br />
than one-third <strong>of</strong> adults 20 and older were obese (body mass <strong>in</strong>dex (BMI) ≥ 30),<br />
compared with fewer than one <strong>in</strong> seven <strong>in</strong> 1960-62; an additional one-third <strong>of</strong> adults<br />
were overweight (BMI ≥25) (Flegal, et al., 2010; National Center for Health Statistics<br />
(NCHS), 2008). Among children and adolescents ages 2-19, more than one <strong>in</strong> six were<br />
obese (≥ 95th percentile) <strong>in</strong> 2007-08, more than triple <strong>the</strong> five percent obesity rate <strong>in</strong><br />
<strong>the</strong> early 1970s (Ogden and Carroll, 2010).<br />
Ill<strong>in</strong>ois has experienced <strong>the</strong> same upward trend <strong>in</strong> obesity rates. From 1995 through 2009, <strong>the</strong><br />
prevalence <strong>of</strong> obesity among adults <strong>in</strong> Ill<strong>in</strong>ois rose by nearly 65 percent, from 16.7 percent <strong>in</strong> 1995 to<br />
27.4 percent <strong>in</strong> 2009 (see Figure 1). An additional 37.1 percent <strong>of</strong> Ill<strong>in</strong>ois adults were overweight <strong>in</strong><br />
2009. Among youth ages 10-17 <strong>in</strong> 2007, more than one <strong>in</strong> five (20.8 percent) were obese while more<br />
than one <strong>in</strong> three (34.9 percent) were overweight or obese (≥ 85th percentile) (S<strong>in</strong>gh, et al., 2010).<br />
There are considerable disparities <strong>in</strong> <strong>the</strong> prevalence <strong>of</strong> obesity, with rates vary<strong>in</strong>g by gender, race/<br />
ethnicity, and socio-economic status. In 2009 <strong>in</strong> Ill<strong>in</strong>ois, for example, 72.6 percent <strong>of</strong> adult men were<br />
ei<strong>the</strong>r overweight or obese (44.0 and 28.6 percent, respectively), while 56.5 percent <strong>of</strong> women were<br />
overweight or obese (26.2 percent and 30.4 percent, respectively). Similarly, 14.7 percent <strong>of</strong> high school<br />
boys <strong>in</strong> Ill<strong>in</strong>ois were obese <strong>in</strong> 2009, compared to 9.0 percent <strong>of</strong> high school girls. Obesity prevalence<br />
among Ill<strong>in</strong>ois adults generally rises from adolescence and young adulthood through middle age, before<br />
decl<strong>in</strong><strong>in</strong>g among older adults (see Figure 2). Racial/ethnic differences are similarly large, with <strong>the</strong> highest<br />
obesity prevalence among youth and adult Blacks and <strong>the</strong> lowest among non-Hispanic Whites (see Figure<br />
3). F<strong>in</strong>ally, <strong>the</strong>re are strik<strong>in</strong>g differences <strong>in</strong> obesity prevalence across different socioeconomic groups,<br />
with considerably lower rates among <strong>the</strong> most educated and highest <strong>in</strong>come Ill<strong>in</strong>oisans than among <strong>the</strong>ir<br />
less educated and lower <strong>in</strong>come counterparts (see Figure 4).<br />
Figure 2<br />
Prevalence <strong>of</strong> Obesity by Age, Ill<strong>in</strong>ois, 2009<br />
Note: 12-17 year old rate reflects prevalence among high school students.<br />
Sources: Youth Risk Behavior Surveillance System, http://apps.nccd.cdc.gov/youthonl<strong>in</strong>e/App/<br />
Default.aspx, and Behavioral Risk Factor Surveillance System, http://apps.nccd.cdc.gov/brfss/<br />
Figure 1<br />
Prevalence <strong>of</strong> Obesity <strong>in</strong> Adults, Ill<strong>in</strong>ois 1995-2009<br />
Source: Behavioral Risk Factor Surveillance System,<br />
http://apps.nccd.cdc.gov/brfss/<br />
35<br />
30<br />
31.3<br />
30.5<br />
36.2<br />
27.4<br />
25<br />
24.7<br />
24.7<br />
Percent Obese<br />
25<br />
20<br />
15<br />
10<br />
16.7<br />
Percent Obese<br />
20<br />
15<br />
10<br />
5<br />
11.9<br />
14.8<br />
5<br />
0<br />
12 -17 18 -24 25 -34 35 -44 45 -54 55 -64 65+<br />
0<br />
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009<br />
4 5
Figure 3<br />
Prevalence <strong>of</strong> Obesity by Race/Ethnicity, Ill<strong>in</strong>ois, 2009<br />
Note: Youth rates reflect prevalence among high school students.<br />
Sources: Youth Risk Behavior Surveillance System, http://apps.nccd.cdc.gov/youthonl<strong>in</strong>e/App/Default.<br />
aspx, and Behavioral Risk Factor Surveillance System, http://apps.nccd.cdc.gov/brfss/<br />
70<br />
Figure 5<br />
Soda Consumption and Adult Obesity Prevalence, California Counties, 2005<br />
Source: Babey, et al.,<br />
2009 and authors’<br />
calculations.<br />
Youth<br />
Adults<br />
65<br />
40<br />
36.5<br />
Percent Obese<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
9.8<br />
26.5<br />
18.4<br />
12.9<br />
30<br />
Percent <strong>of</strong> Adults Who Are<br />
Overweight <strong>of</strong> Obese<br />
60<br />
55<br />
50<br />
5<br />
0<br />
White Black Hispanic<br />
45<br />
y = 16.44ln(x) + 6.1142<br />
R² = 0.6656<br />
Figure 4<br />
Prevalence <strong>of</strong> Obesity by Education and Income, Adults, Ill<strong>in</strong>ois, 2009<br />
Source: Behavioral Risk Factor Surveillance System, http://apps.nccd.cdc.gov/brfss/<br />
40<br />
10 15 20 25 30 35 40<br />
% Adults Dr<strong>in</strong>k<strong>in</strong>g One or More Sodas per Day<br />
Percent Obese<br />
40<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
< High School<br />
High School or GED<br />
Some Post-High School<br />
College Graduates<br />
Both Vartanian and colleagues (2007) and Gortmaker and colleagues (2009) note that studies funded<br />
by <strong>the</strong> food and beverage <strong>in</strong>dustry are more likely to f<strong>in</strong>d smaller or less consistent associations between<br />
SSB consumption and weight. In addition, SSB consumption is l<strong>in</strong>ked to numerous adverse health and<br />
nutrition consequences. Vartanian and colleagues’ (2007) review highlights <strong>the</strong> negative impact <strong>of</strong><br />
SSB consumption on calcium <strong>in</strong>take – largely from lower milk consumption among those consum<strong>in</strong>g<br />
more SSBs – and on o<strong>the</strong>r nutrient <strong>in</strong>take (<strong>in</strong>clud<strong>in</strong>g fiber, prote<strong>in</strong>, and rib<strong>of</strong>lav<strong>in</strong>), as well as various<br />
health outcomes. Similarly, Gortmaker and colleagues (2009) summarize <strong>the</strong> evidence relat<strong>in</strong>g<br />
SSB consumption to type 2 diabetes, lower bone density, dental problems, headaches, anxiety, and<br />
sleep loss.<br />
SSB consumption and its contribution to caloric <strong>in</strong>take are most pronounced among young people<br />
(see Figure 6). Us<strong>in</strong>g data from <strong>the</strong> 1999-2004 National Health and Nutrition Exam<strong>in</strong>ation Survey<br />
(NHANES), Wang and colleagues (2008) estimated that youth ages 12-19 consumed about 16 percent<br />
<strong>of</strong> total caloric <strong>in</strong>take – or 356 calories per day – from SSBs; among children ages 2-5 and 6-11, SSB<br />
consumption accounted for about 11 percent <strong>of</strong> <strong>in</strong>take (176 and 229 calories per day, respectively).<br />
Us<strong>in</strong>g <strong>the</strong> same data, Bleich and colleagues (2009) estimated that SSBs accounted for about 12 percent<br />
<strong>of</strong> total caloric <strong>in</strong>take among 20-44 year olds (289 calories per day), before fall<strong>in</strong>g to 6 percent and<br />
5 percent among those 45-64 and 65 and older, respectively. Rates <strong>of</strong> SSB consumption rise from<br />
70 percent among 2-5 year olds <strong>in</strong> 1999-2004, peak<strong>in</strong>g at 84 percent for ages 12-19, fall<strong>in</strong>g to<br />
72 percent for 20-44 year olds, and decl<strong>in</strong>e among older ages (Wang, et al., 2008; Bleich, et al., 2009).<br />
Numerous studies demonstrate <strong>the</strong> persistence <strong>of</strong> body weight over <strong>the</strong> life cycle, show<strong>in</strong>g that obese<br />
children are likely to become obese adults (McTigue, et al., 2002). Contributions <strong>of</strong> SSB consumption to<br />
high rates <strong>of</strong> obesity among children and adolescents will most likely lead to greater prevalence <strong>of</strong> adult<br />
obesity <strong>in</strong> <strong>the</strong> future. The habitual nature <strong>of</strong> SSB consumption is also well known, suggest<strong>in</strong>g that higher<br />
caloric <strong>in</strong>take from SSBs among younger populations can persist <strong>in</strong>to adulthood, fur<strong>the</strong>r <strong>in</strong>creas<strong>in</strong>g <strong>the</strong><br />
risk for obesity (Popk<strong>in</strong> and Duffey, 2010). Obesity among adolescents and young adults is <strong>of</strong> particular<br />
concern given its l<strong>in</strong>ks to severe obesity at older ages. For example, us<strong>in</strong>g National Longitud<strong>in</strong>al Study<br />
<strong>of</strong> Adolescent Health data, The and colleagues (2010) found that obese youth at basel<strong>in</strong>e (ages 12-21)<br />
were significantly more likely to be severely obese twelve years later.<br />
Figure 6<br />
Per Capita Daily Consumption <strong>of</strong> Calories from SSBs, by Type, 1999-2004<br />
Source: Adapted from Wang, et al. (2008) and Bleich, et al., (2009).<br />
kcal<br />
350<br />
300<br />
250<br />
200<br />
150<br />
100<br />
O<strong>the</strong>r<br />
Sport Dr<strong>in</strong>ks<br />
Section II Taxation as<br />
Public Health Policy<br />
Increased awareness <strong>of</strong> <strong>the</strong> obesity epidemic and its health and economic consequences<br />
has spurred policy makers, public health practitioners, advocates, and o<strong>the</strong>rs to look for<br />
<strong>in</strong>terventions to promote healthier eat<strong>in</strong>g and <strong>in</strong>creased physical activity (Institute <strong>of</strong><br />
Medic<strong>in</strong>e (IOM), 2005). Some <strong>of</strong> <strong>the</strong> proposed policy solutions have explicitly targeted<br />
SSB consumption by limit<strong>in</strong>g access to SSBs <strong>in</strong> public facilities (schools, government<br />
worksites, and recreation centers); <strong>in</strong>creas<strong>in</strong>g access to dr<strong>in</strong>k<strong>in</strong>g water and encourag<strong>in</strong>g<br />
water as an alternative to SSBs; restrict<strong>in</strong>g market<strong>in</strong>g <strong>of</strong> SSBs to children; and adopt<strong>in</strong>g<br />
policies that alter relative prices <strong>of</strong> SSBs and healthier alternatives (Centers for Disease<br />
Control and Prevention (CDC), 2009; IOM, 2009). These strategies have, at least <strong>in</strong><br />
part, been identified as hav<strong>in</strong>g potential to curb obesity based on successful experiences<br />
with similar approaches to reduc<strong>in</strong>g o<strong>the</strong>r unhealthy behaviors, notably tobacco use and<br />
harmful dr<strong>in</strong>k<strong>in</strong>g.<br />
In The Wealth <strong>of</strong> Nations, Adam Smith (1776) wrote “<strong>Sugar</strong>, rum, and tobacco are commodities which<br />
are nowhere necessaries <strong>of</strong> life, which are become objects <strong>of</strong> almost universal consumption, and which<br />
are <strong>the</strong>refore extremely proper subjects <strong>of</strong> taxation.” S<strong>in</strong>ce Smith focused on <strong>the</strong> revenue generat<strong>in</strong>g<br />
potential <strong>of</strong> <strong>the</strong>se taxes, nearly every government worldwide has taxed tobacco products and alcoholic<br />
beverages to raise revenues. In recent years, <strong>the</strong> beneficial public health impact <strong>of</strong> tobacco and alcohol<br />
taxes has become clear as extensive research has demonstrated <strong>the</strong> effectiveness <strong>of</strong> higher taxes <strong>in</strong><br />
reduc<strong>in</strong>g tobacco and alcohol use and <strong>the</strong>ir consequences (International Agency for Research on Cancer<br />
(IARC), <strong>in</strong> press; Wagenaar, et al., 2009, 2010). Reduced use is a result <strong>of</strong> prevent<strong>in</strong>g uptake <strong>in</strong> youth,<br />
promot<strong>in</strong>g cessation among current users or reduc<strong>in</strong>g <strong>the</strong>ir frequency and <strong>in</strong>tensity <strong>of</strong> consumption, and<br />
deterr<strong>in</strong>g relapse among former users (IARC, <strong>in</strong> press; Wagenaar, et al., 2009). This improves public<br />
health by reduc<strong>in</strong>g <strong>the</strong> disease burden <strong>of</strong> tobacco and alcohol use, and lower<strong>in</strong>g accidents, violence, and<br />
o<strong>the</strong>r consequences <strong>of</strong> harmful dr<strong>in</strong>k<strong>in</strong>g (IARC, <strong>in</strong> press; Wagenaar,<br />
et al., 2010).<br />
In <strong>the</strong> United States, evidence on <strong>the</strong> effectiveness <strong>of</strong> higher taxes <strong>in</strong> reduc<strong>in</strong>g tobacco use and its<br />
consequences has led to sharp <strong>in</strong>creases <strong>in</strong> tobacco taxes and prices. This significantly reduced tobacco<br />
use among youth and adults, while generat<strong>in</strong>g considerable new revenues that some states have used<br />
to support o<strong>the</strong>r prevention and cessation activities, lead<strong>in</strong>g to reductions <strong>in</strong> tobacco use beyond those<br />
that result from <strong>the</strong> tax <strong>in</strong>crease alone (Chaloupka, 2010) (see Figure 7 for trends <strong>in</strong> cigarette taxes<br />
and cigarette sales). In contrast, despite similarly strong evidence on <strong>the</strong> impact <strong>of</strong> higher alcohol taxes<br />
and prices, <strong>the</strong> real value <strong>of</strong> alcohol taxes has been eroded over time by <strong>in</strong>flation, contribut<strong>in</strong>g to fall<strong>in</strong>g<br />
alcohol prices and higher rates <strong>of</strong> dr<strong>in</strong>k<strong>in</strong>g and its consequences than would exist had <strong>the</strong>se taxes kept<br />
pace with <strong>in</strong>flation over time (Xu and Chaloupka, <strong>in</strong> press) (see Figure 8 for trends <strong>in</strong> beer taxes and<br />
beer sales).<br />
50<br />
0<br />
Age 2-5 Age 6-11 Age 12-19 Age 20-44 Age 45-65 Age 65+<br />
Fruit Punch<br />
Soda<br />
8 9
Figure 7<br />
Cigarette <strong>Taxes</strong> and Cigarette Sales, US, 1973-2010<br />
Source:<br />
Orzechowski and<br />
Walker (2011)<br />
and authors’<br />
calculations.<br />
Billion Packs<br />
28.5<br />
26.5<br />
24.5<br />
22.5<br />
20.5<br />
18.5<br />
16.5<br />
14.5<br />
1973<br />
1976<br />
1979<br />
Figure 8<br />
Beer <strong>Taxes</strong> and Beer Sales, US, 1973-2009<br />
Source: Brewers’<br />
Almanac, 2010, and<br />
authors’ calculations.<br />
215.0<br />
1982<br />
Cigarette Sales<br />
1985<br />
1988<br />
1991<br />
Beer Sales<br />
Cigarette Tax<br />
1994 1997 2000<br />
Beer Tax<br />
2003<br />
2006<br />
2009<br />
$2.25<br />
$2.05<br />
$1.85<br />
$1.65<br />
$1.45<br />
$1.25<br />
$1.05<br />
$0.85<br />
$0.65<br />
$0.45<br />
$1.25<br />
Tax Per Pack<br />
(Feb 2011 Dollars)<br />
In Ill<strong>in</strong>ois, <strong>the</strong> 6.25 percent state sales tax is applied to many beverages, <strong>in</strong>clud<strong>in</strong>g: regular and diet<br />
carbonated s<strong>of</strong>t dr<strong>in</strong>ks; juice dr<strong>in</strong>ks conta<strong>in</strong><strong>in</strong>g 50 percent or less juice; sweetened, ready-to-dr<strong>in</strong>k teas;<br />
and sports dr<strong>in</strong>ks and o<strong>the</strong>r isotonic beverages. This is more than two percentage po<strong>in</strong>ts higher than <strong>the</strong><br />
average sales tax applied to <strong>the</strong>se beverages across all states. Juice dr<strong>in</strong>ks conta<strong>in</strong><strong>in</strong>g more than 50<br />
percent juice, bottled waters, and o<strong>the</strong>r beverages are subject to <strong>the</strong> 1.00 percent sales tax that applies<br />
to most foods and beverages.<br />
The success with significant tobacco excise tax <strong>in</strong>creases <strong>in</strong> reduc<strong>in</strong>g tobacco use and health<br />
consequences has led to calls for sizable new taxes on SSBs (e.g. Brownell and Frieden, 2009). Many<br />
state and local governments have debated such taxes <strong>in</strong> recent years, with proposed taxes vary<strong>in</strong>g<br />
widely. Some proposals call for significantly higher sales taxes on SSBs than those that already exist,<br />
while o<strong>the</strong>rs propose ad valorem (value-based) or specific (volume or weight-based) excise taxes (see<br />
Figure 10 for states with recent legislative proposals for SSB taxes).<br />
CA<br />
OR<br />
WA<br />
NV<br />
ID<br />
AZ<br />
UT<br />
MT<br />
WY<br />
NM<br />
CO<br />
ND<br />
SD<br />
NE<br />
KS<br />
TX<br />
OK<br />
MN<br />
IA<br />
MO<br />
AR<br />
LA<br />
WI<br />
IL<br />
MS<br />
IN<br />
AL<br />
MI<br />
TN<br />
KY<br />
OH<br />
GA<br />
Figure 9<br />
Sales Tax Rates on Carbonated Beverages, July 1, 2010<br />
NY<br />
PA<br />
MD<br />
WV<br />
VA<br />
SC<br />
FL<br />
NC<br />
VT<br />
NH<br />
MA<br />
ME<br />
RI<br />
NJ CT<br />
DE<br />
Source: Bridg<strong>in</strong>g <strong>the</strong> Gap Research<br />
Program, University <strong>of</strong> Ill<strong>in</strong>ois at Chicago;<br />
http://www.bridg<strong>in</strong>g<strong>the</strong>gapresearch.org<br />
Map Legend<br />
> 7% (n=5 States)<br />
> 5% to < 7% (n=19 States)<br />
> 3 to < 5% (n=5 States)<br />
> 1 to < 3% (n=5 States)<br />
205.0<br />
$1.15<br />
AK<br />
0% (n=16 States Plus DC)<br />
195.0<br />
$1.05<br />
Million Barrels<br />
185.0<br />
175.0<br />
165.0<br />
155.0<br />
145.0<br />
135.0<br />
1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009<br />
Governments have yet to heed Smith’s call for sugar taxes, with some tak<strong>in</strong>g <strong>the</strong> opposite approach<br />
and subsidiz<strong>in</strong>g sugar and o<strong>the</strong>r high calorie sweeteners. In <strong>the</strong> United States, SSB taxation is largely<br />
limited to subject<strong>in</strong>g SSBs and o<strong>the</strong>r select beverages to sales taxes that add a few percent to prices<br />
(<strong>in</strong> contrast to cigarette taxes which account for nearly half <strong>of</strong> cigarette prices), and a few states adopt<strong>in</strong>g<br />
small excise taxes or fees on carbonated and o<strong>the</strong>r beverages (Chriqui, et al., 2008; Bridg<strong>in</strong>g <strong>the</strong> Gap<br />
Research Program, 2010) (see Figure 9).<br />
$0.95<br />
$0.85<br />
$0.75<br />
$0.65<br />
$0.55<br />
$0.45<br />
Tax Per 6-Pack<br />
(Feb 2011 Dollars)<br />
WA<br />
OR<br />
NV<br />
CA<br />
AK<br />
ID<br />
AZ<br />
UT<br />
MT<br />
WY<br />
CO<br />
NM<br />
ND<br />
SD<br />
NE<br />
KS<br />
OK<br />
TX<br />
MN<br />
IA<br />
MO<br />
AR<br />
LA<br />
WI<br />
IL<br />
MS<br />
HI<br />
NY<br />
MI<br />
PA<br />
OH<br />
MD<br />
IN<br />
WV<br />
VA<br />
KY<br />
NC<br />
TN<br />
SC<br />
AL GA<br />
FL<br />
VT<br />
Figure 10<br />
Legislative Proposals for SSB <strong>Taxes</strong>, March 2011<br />
NH<br />
MA<br />
ME<br />
RI<br />
NJ CT<br />
DE<br />
Source: Yale University, Rudd Center<br />
for Food Policy & Obesity (2011);<br />
http://www.yaleruddcenter.org/what_<br />
we_do.aspxid=272<br />
Map Legend<br />
<strong>Excise</strong> Tax<br />
Sales Tax<br />
<strong>Excise</strong> and Sales<br />
HI<br />
10<br />
11
Experiences with excise and o<strong>the</strong>r taxes on tobacco products provide some <strong>in</strong>sights concern<strong>in</strong>g<br />
alternative types <strong>of</strong> SSB taxes. As described by <strong>the</strong> World Health Organization (WHO, 2010) <strong>in</strong> its<br />
Technical Manual for Tobacco Tax Adm<strong>in</strong>istration, uniform specific taxes on all tobacco products<br />
will have <strong>the</strong> greatest public health impact, while also generat<strong>in</strong>g significant tax revenues that are<br />
relatively stable over time. A uniform specific excise tax sends <strong>the</strong> message that all tobacco products<br />
are equally harmful, <strong>in</strong> contrast to tiered-specific or ad valorem taxes which apply different taxes<br />
to similar products based on <strong>the</strong>ir characteristics (e.g., cigarette length or presence/absence <strong>of</strong> a<br />
filter) or prices. Moreover, a uniform specific excise tax m<strong>in</strong>imizes <strong>the</strong> price gap between higher and<br />
lower-priced products, reduc<strong>in</strong>g opportunities for consumers to avoid at least some <strong>of</strong> <strong>the</strong> tax by<br />
substitut<strong>in</strong>g to cheaper products.<br />
155<br />
153<br />
Figure 11<br />
Carbonated S<strong>of</strong>t Dr<strong>in</strong>k Prices and Prevalence <strong>of</strong> Obesity among Youth, 1999-2009<br />
Sources: Bureau <strong>of</strong> Labor Statistics, Youth Risk Behavior Surveillance System<br />
on-l<strong>in</strong>e, and authors’ calculations.<br />
Carb. Bev.<br />
% Obese, Youth<br />
12.9<br />
With respect to SSB taxes, a uniform specific tax based on volume (e.g., per ounce) or sugar-content<br />
(e.g., per gram <strong>of</strong> added sugar) should have a greater impact on consumption than a comparable<br />
ad valorem excise tax or a sales tax, given <strong>the</strong> potential for consumers to purchase larger volumes<br />
that are less expensive per ounce (e.g., a two-liter bottle ra<strong>the</strong>r than a 12-ounce can) or cheaper<br />
brands <strong>in</strong> response to <strong>the</strong> price <strong>in</strong>creases result<strong>in</strong>g from <strong>the</strong> tax (Chriqui, et al., <strong>in</strong> progress; Powell<br />
and Chriqui, <strong>in</strong> press). Likewise, specific excise taxes are easier adm<strong>in</strong>istratively and reduce<br />
opportunities for tax avoidance and evasion as <strong>the</strong>y do not require valuation <strong>of</strong> a product. The ma<strong>in</strong><br />
disadvantage <strong>of</strong> a specific excise tax is that it needs to be regularly adjusted for <strong>in</strong>flation over time<br />
<strong>in</strong> order to ma<strong>in</strong>ta<strong>in</strong> its public health and revenue impact. F<strong>in</strong>ally, excise taxes are likely to have a<br />
greater impact on consumption than sales taxes given that excise taxes are reflected <strong>in</strong> <strong>the</strong> shelfprices<br />
<strong>of</strong> SSBs while sales taxes are imposed at <strong>the</strong> checkout after purchase decisions have largely<br />
been made (Chriqui, et al., <strong>in</strong> progress; Powell and Chriqui, <strong>in</strong> press).<br />
Given <strong>the</strong> parallel trends <strong>in</strong> SSB consumption and obesity, a grow<strong>in</strong>g number <strong>of</strong> researchers<br />
have recently assessed <strong>the</strong> impact <strong>of</strong> beverage taxes and prices on beverage consumption. This<br />
research clearly demonstrates that higher beverage prices significantly reduce consumption, with<br />
one recent comprehensive review conclud<strong>in</strong>g that a 10 percent price <strong>in</strong>crease could reduce s<strong>of</strong>t<br />
dr<strong>in</strong>k consumption by about eight percent (Andreyeva, et al., 2010). Estimates from studies that<br />
have focused on <strong>the</strong> demand for SSBs f<strong>in</strong>d even larger reductions <strong>in</strong> consumption for a 10 percent<br />
price <strong>in</strong>crease. L<strong>in</strong> and colleagues (2010) estimate that a ten percent <strong>in</strong>crease <strong>in</strong> SSB prices would<br />
reduce consumption by 9.5 to 12.6 percent.<br />
Less clear is <strong>the</strong> impact <strong>of</strong> SSB taxes on weight outcomes. Exist<strong>in</strong>g research f<strong>in</strong>ds little or no<br />
impact <strong>of</strong> exist<strong>in</strong>g low taxes on BMI or obesity rates, not<strong>in</strong>g that this is likely due to <strong>the</strong> low current<br />
tax rates and that <strong>the</strong> po<strong>in</strong>t estimates imply that sizable taxes would significantly reduce obesity<br />
<strong>in</strong> at least some populations (F<strong>in</strong>kelste<strong>in</strong>, et al., 2010; Sturm, et al., 2010; Powell et al., 2009).<br />
O<strong>the</strong>rs conclude that even large SSB taxes would have little impact on weight outcomes suggest<strong>in</strong>g<br />
that reductions <strong>in</strong> caloric <strong>in</strong>take from SSBs would be largely <strong>of</strong>fset by <strong>in</strong>creased calories from o<strong>the</strong>r<br />
beverages such as whole milk (Fletcher, et al., 2010). Still o<strong>the</strong>rs f<strong>in</strong>d only partial substitution <strong>in</strong><br />
response to changes <strong>in</strong> relative prices <strong>of</strong> SSBs and o<strong>the</strong>r beverages, conclud<strong>in</strong>g that sizable SSB<br />
taxes could significantly reduce net caloric <strong>in</strong>take, body weight, and obesity among children and<br />
adults (Smith, et al., 2010). Fur<strong>the</strong>r, <strong>the</strong>se studies f<strong>in</strong>d that price responsiveness is greater<br />
among young people, those on lower <strong>in</strong>comes, and those already at higher weight (Powell and<br />
Chriqui, <strong>in</strong> press).<br />
Inflation Adjusted Carbonated<br />
Beverage Price Index<br />
151<br />
149<br />
147<br />
145<br />
143<br />
1998 2000 2002 2004 2006 2008<br />
Despite this mixed evidence that likely reflects very low exist<strong>in</strong>g taxes on SSBs, <strong>the</strong> weight <strong>of</strong> <strong>the</strong> evidence<br />
suggests that taxes on <strong>the</strong> order <strong>of</strong> a cent or two per ounce will raise prices enough to reduce net caloric<br />
<strong>in</strong>take and obesity. Indeed, recent <strong>in</strong>creases <strong>in</strong> SSB prices have been accompanied by reductions <strong>in</strong><br />
obesity prevalence among adolescents although o<strong>the</strong>r factors are also likely contribut<strong>in</strong>g to <strong>the</strong> decl<strong>in</strong>e<br />
(see Figure 11). More research is needed to understand <strong>the</strong> impact <strong>of</strong> large changes <strong>in</strong> relative prices <strong>of</strong><br />
SSBs on weight outcomes. At <strong>the</strong> very least, such taxes would have little impact on overall caloric <strong>in</strong>take,<br />
while promot<strong>in</strong>g substitution <strong>of</strong> healthier beverages for <strong>the</strong> empty calories conta<strong>in</strong>ed <strong>in</strong> SSBs, reduc<strong>in</strong>g<br />
some <strong>of</strong> <strong>the</strong> health consequences associated with SSB consumption.<br />
Significant SSB taxes can generate substantial new revenues; one recent estimate suggests that a<br />
national penny per ounce SSB tax could raise nearly $15 billion <strong>in</strong> <strong>the</strong> first year (Brownell, et al., 2009).<br />
These revenues could support o<strong>the</strong>r costly components <strong>of</strong> a comprehensive obesity prevention strategy,<br />
<strong>in</strong>clud<strong>in</strong>g mass-media public education campaigns, subsidies that lower <strong>the</strong> relative prices <strong>of</strong> healthier<br />
foods and beverages, and programs to make safe, free dr<strong>in</strong>k<strong>in</strong>g water more widely available. As seen<br />
with tobacco tax <strong>in</strong>creases that earmark revenues for tobacco control efforts, <strong>the</strong>re is considerable public<br />
support for SSB taxes when <strong>the</strong> revenues generated are used to support activities to reduce obesity<br />
among children and adults (Yale Rudd Center, 2009).<br />
12.4<br />
11.9<br />
11.4<br />
10.9<br />
10.4<br />
Percent Obese<br />
12 13
Section III <strong>Potential</strong> <strong>Impact</strong><br />
<strong>of</strong> <strong>Sugar</strong>-<strong>Sweetened</strong><br />
and O<strong>the</strong>r Beverage<br />
<strong>Excise</strong> <strong>Taxes</strong> <strong>in</strong> Ill<strong>in</strong>ois<br />
We estimate <strong>the</strong> potential impact <strong>of</strong> an excise tax on SSBs <strong>in</strong> Ill<strong>in</strong>ois draw<strong>in</strong>g from<br />
<strong>the</strong> presented science on <strong>the</strong> impact <strong>of</strong> SSB consumption on weight outcomes and <strong>the</strong><br />
effects <strong>of</strong> beverage prices on beverage consumption, as well as published research on<br />
<strong>the</strong> impact <strong>of</strong> SSB consumption on diabetes risk, and recent national and state-level<br />
data on beverage consumption, prices, obesity prevalence, diabetes <strong>in</strong>cidence, and health<br />
care costs <strong>of</strong> diabetes and obesity. Figure 12 illustrates <strong>the</strong> analytic framework <strong>of</strong><br />
our estimation.<br />
Specifically, we estimate <strong>the</strong> impact <strong>of</strong> four alternative excise taxes: a one-cent per ounce excise tax<br />
on SSBs only; a one-cent per ounce excise tax on SSBs and <strong>the</strong>ir diet/low-calorie versions (i.e., all<br />
beverages); a two-cent per ounce excise tax on SSBs only; and a two-cent per ounce excise tax on<br />
all beverages. The outcomes assessed are beverage consumption; tax revenues; frequency <strong>of</strong> SSB<br />
consumption; diabetes <strong>in</strong>cidence; health care costs <strong>of</strong> diabetes; obesity prevalence; and obesity-related<br />
health care costs.<br />
<strong>Impact</strong> on Price<br />
Recent studies estimate that <strong>the</strong> average price for carbonated s<strong>of</strong>t dr<strong>in</strong>ks (CSDs) <strong>in</strong> <strong>the</strong> United States is<br />
about 4.5 cents per ounce (Andreyeva, et al., <strong>in</strong> press; Hahn 2009). Based on an assessment <strong>of</strong> prices<br />
from a variety <strong>of</strong> vendors, Andreyeva and colleagues (<strong>in</strong> press) estimated that <strong>the</strong> average prices per<br />
ounce <strong>of</strong> o<strong>the</strong>r beverages are: 7 cents for fruit dr<strong>in</strong>ks; 5 cents for sports dr<strong>in</strong>ks, 9 cents for ready-to-dr<strong>in</strong>k<br />
(RTD) teas; 5.5 cents for flavored waters; 17.5 cents for energy dr<strong>in</strong>ks; and 20 cents for RTD c<strong>of</strong>fees.<br />
Based on market shares <strong>of</strong> different beverages, <strong>the</strong> weighted average price for all beverages <strong>in</strong> 2010 is<br />
5.3 cents per ounce. Future prices, exclusive <strong>of</strong> taxes, are assumed to rise with <strong>the</strong> average rate <strong>of</strong> CSD<br />
<strong>in</strong>flation over <strong>the</strong> period from 1978 through 2010 (Andreyeva, et al., <strong>in</strong> press), produc<strong>in</strong>g an estimated<br />
average price <strong>of</strong> all beverages <strong>in</strong> 2011 <strong>of</strong> 5.45 cents per ounce. Given this, a one-cent per ounce tax will<br />
result <strong>in</strong> about an average 18.3 percent <strong>in</strong>crease <strong>in</strong> price, if fully passed on to consumers. Similarly, a<br />
two-cent per ounce tax will result <strong>in</strong> about an average 36.7 percent <strong>in</strong>crease <strong>in</strong> price, if fully passed on<br />
to consumers.<br />
Figure 12<br />
Analytic Framework<br />
<strong>Excise</strong> Tax on SSB<br />
Increase <strong>in</strong> Price<br />
Net Increase<br />
Tax Revenue<br />
At least one study suggests that beverage sales taxes lead to larger <strong>in</strong>creases <strong>in</strong> prices than accounted<br />
for by <strong>the</strong> tax alone, with prices ris<strong>in</strong>g by about 129 percent <strong>of</strong> <strong>the</strong> amount <strong>of</strong> <strong>the</strong> tax (Besley and<br />
Rosen, 1999). However, <strong>in</strong> order to produce conservative estimates <strong>of</strong> <strong>the</strong> impact <strong>of</strong> <strong>the</strong> tax on obesity,<br />
diabetes, and related health care costs, we assume that <strong>the</strong> tax results <strong>in</strong> a comparable <strong>in</strong>crease <strong>in</strong> <strong>the</strong><br />
retail prices <strong>of</strong> <strong>the</strong> taxed beverages. A greater pass through <strong>of</strong> <strong>the</strong> tax to price would result <strong>in</strong> greater<br />
reductions <strong>in</strong> SSB consumption, obesity, and related consequences/costs, but somewhat lower tax<br />
revenues. A less than full pass through <strong>of</strong> <strong>the</strong> tax to price (partial absorb<strong>in</strong>g <strong>of</strong> <strong>the</strong> tax by beverage<br />
companies, distributors, and/or retailers) would lead to smaller reductions <strong>in</strong> beverage consumption,<br />
obesity, and related public health consequences and economic costs, but somewhat higher tax revenues.<br />
When model<strong>in</strong>g <strong>the</strong> impact <strong>of</strong> a SSB-only tax, we assume that <strong>the</strong> prices <strong>of</strong> diet beverages do not change<br />
follow<strong>in</strong>g <strong>the</strong> imposition <strong>of</strong> <strong>the</strong> tax. In practice, however, <strong>the</strong> beverage <strong>in</strong>dustry may spread <strong>the</strong> tax across<br />
all beverages, but model<strong>in</strong>g such strategic behavior is beyond <strong>the</strong> scope <strong>of</strong> our paper.<br />
Reduced SSB<br />
Consumption<br />
Lower Incident<br />
Type 2 Diabetes<br />
Lower Daily<br />
Caloric Intake<br />
Lower Medical Cost<br />
Lower Obesity<br />
14<br />
15
<strong>Impact</strong> on Overall Consumption<br />
Ill<strong>in</strong>ois-specific data on beverage consumption are not available; however, comparable data are available<br />
nationally and regionally and we use <strong>the</strong>se to estimate consumption levels <strong>in</strong> Ill<strong>in</strong>ois, us<strong>in</strong>g <strong>the</strong> approach<br />
described by Andreyeva and colleagues (<strong>in</strong> press). Specifically, we used 2008 regional sales volume<br />
data for <strong>the</strong> consumption <strong>of</strong> carbonated s<strong>of</strong>t dr<strong>in</strong>ks (CSDs), fruit beverages and ready-to-dr<strong>in</strong>k (RTD) teas<br />
from <strong>the</strong> Beverage Market<strong>in</strong>g Corporation (2009a,b,c) and 2008 national sales volume data for sports<br />
dr<strong>in</strong>ks, flavored/enhanced waters, energy dr<strong>in</strong>ks, and RTD c<strong>of</strong>fees from <strong>the</strong> Beverage World (2009).<br />
We estimated beverage consumption <strong>in</strong> Ill<strong>in</strong>ois based on <strong>the</strong> state’s share <strong>of</strong> population <strong>in</strong> <strong>the</strong> total<br />
U.S. population, adjust<strong>in</strong>g for variability <strong>in</strong> per capita beverage consumption <strong>in</strong> <strong>the</strong> East Central region<br />
(consist<strong>in</strong>g <strong>of</strong> Ill<strong>in</strong>ois, Indiana, Kentucky, Michigan, Ohio, West Virg<strong>in</strong>ia and Wiscons<strong>in</strong>) for CSDs and fruit<br />
dr<strong>in</strong>ks, and <strong>in</strong> <strong>the</strong> Midwest region (consist<strong>in</strong>g <strong>of</strong> Ill<strong>in</strong>ois, Indiana, Iowa, Kansas, Michigan, M<strong>in</strong>nesota,<br />
Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wiscons<strong>in</strong>) for RTD teas. This approach does not<br />
account for possible variation <strong>in</strong> beverage consumption with<strong>in</strong> regions that could be due to differences<br />
<strong>in</strong> demographic characteristics, consumer tastes, and o<strong>the</strong>r factors. It is never<strong>the</strong>less preferable to<br />
assum<strong>in</strong>g constant per capita beverage consumption across <strong>the</strong> nation and is <strong>the</strong> best option available<br />
given exist<strong>in</strong>g data.<br />
27.3 13.1 18.3 15.6 2.4<br />
47.2<br />
62.3<br />
181.2<br />
Figure 13<br />
Estimated Annual Beverage Consumption by Beverage Type, Ill<strong>in</strong>ois, 2011<br />
447.0<br />
Note: Estimates are <strong>in</strong> millions <strong>of</strong> gallons;<br />
textured slices are for non-SSBs.<br />
Source: Andreyeva, et al., unpublished data.<br />
Follow<strong>in</strong>g Andreyeva and colleagues (<strong>in</strong> press), we estimate future SSB and diet beverage consumption<br />
based on beverage specific historic trends <strong>in</strong> consumption. Given available data and perceived stability<br />
<strong>of</strong> trends <strong>in</strong> consumption, average annual rates <strong>of</strong> change over <strong>the</strong> period <strong>of</strong> 2000-2009 are used for<br />
CSDs, 2005-2009 for fruit beverages, 2006-2009 for sports dr<strong>in</strong>ks, 2007-2009 for RTD teas, 2008-<br />
2009 for flavored/enhanced water, 2008-2009 for energy dr<strong>in</strong>ks, and 2007-2009 for RTD c<strong>of</strong>fee<br />
(Beverage Market<strong>in</strong>g Corporation, 2009a,b,c; Beverage World 2007-2010). Based on this approach,<br />
for example, we assumed that CSD consumption (<strong>the</strong> largest category <strong>of</strong> consumption) would fall by<br />
0.7 percent annually between 2010 and 2015. The share <strong>of</strong> diet varieties <strong>in</strong> CSDs <strong>in</strong> 2008 was 30.85<br />
percent for <strong>the</strong> United States, but varied across regions, with a share <strong>of</strong> 29 percent <strong>in</strong> <strong>the</strong> East Central<br />
region that <strong>in</strong>cludes Ill<strong>in</strong>ois (Beverage Market<strong>in</strong>g Corporation, 2009a). Given <strong>the</strong> lack <strong>of</strong> available data,<br />
we assumed <strong>the</strong> same share <strong>of</strong> diet varieties <strong>in</strong> RTD teas as for CSDs and that only non-diet varieties <strong>of</strong><br />
o<strong>the</strong>r beverages are available. Based on <strong>the</strong> <strong>in</strong>creas<strong>in</strong>g market share <strong>of</strong> diet CSDs, we assumed that <strong>the</strong><br />
share <strong>of</strong> diet varieties <strong>in</strong> CSDs and RTD teas will <strong>in</strong>crease by 0.5 percentage po<strong>in</strong>ts annually.<br />
Based on this approach, we estimate that Ill<strong>in</strong>oisans will consume more than 814 million gallons <strong>of</strong><br />
refreshment beverages <strong>in</strong> 2011. Most <strong>of</strong> this will come <strong>in</strong> <strong>the</strong> form <strong>of</strong> carbonated s<strong>of</strong>t dr<strong>in</strong>ks, with most<br />
<strong>of</strong> <strong>the</strong>se sugar-sweetened carbonated s<strong>of</strong>t dr<strong>in</strong>ks. SSBs will account for more than 80 percent <strong>of</strong> total<br />
consumption – an estimated 620.12 million gallons. Figure 13 shows <strong>the</strong> estimated distribution <strong>of</strong><br />
beverage consumption across beverage types.<br />
In estimat<strong>in</strong>g <strong>the</strong> reductions that would result from alternative excise taxes on SSBs and <strong>the</strong>ir diet<br />
versions, we assumed that all beverage purchases would be subject to <strong>the</strong> excise tax be<strong>in</strong>g modeled.<br />
Specifically, we did not exempt purchases made by participants <strong>in</strong> <strong>the</strong> Supplemental Nutritional<br />
Assistance Program (SNAP) (as is currently done with <strong>the</strong> sales tax on beverages bought with SNAP<br />
benefits). If <strong>the</strong> excise tax is not collected on purchases made by SNAP participants, <strong>the</strong> impact <strong>of</strong><br />
<strong>the</strong> tax on revenues, obesity and its consequences/costs will be smaller than estimated below.<br />
Regular S<strong>of</strong>t Dr<strong>in</strong>ks Diet S<strong>of</strong>t Dr<strong>in</strong>ks Fruit Dr<strong>in</strong>ks<br />
Sports Dr<strong>in</strong>ks RTD Tea - Non-Diet RTD Tea - Diet<br />
Flavored Water Energy Dr<strong>in</strong>ks RTD C<strong>of</strong>fee<br />
Based on <strong>the</strong> recent review by Andreyeva and colleagues (2010), we assumed that <strong>the</strong> price elasticity <strong>of</strong><br />
demand for beverages was -0.8 for <strong>the</strong> scenarios which tax all beverages (SSBs and <strong>the</strong>ir diet versions).<br />
When model<strong>in</strong>g <strong>the</strong> impact <strong>of</strong> taxes on SSBs only, we use a price elasticity <strong>of</strong> -1.2 (Smith et al., 2010),<br />
allow<strong>in</strong>g for greater reductions <strong>in</strong> consumption <strong>of</strong> SSBs as some consumers would switch to <strong>the</strong> nontaxed<br />
diet options that would be relatively less expensive under this scenario.<br />
Us<strong>in</strong>g <strong>the</strong> estimates <strong>of</strong> beverage consumption for Ill<strong>in</strong>ois <strong>in</strong> 2011, Table 2 presents estimated<br />
consumption <strong>of</strong> various beverages for five scenarios: no tax; a one cent per ounce tax on all beverages<br />
considered (CSDs, fruit dr<strong>in</strong>ks, sports dr<strong>in</strong>ks, RTD teas and c<strong>of</strong>fees, flavored waters, and energy dr<strong>in</strong>ks);<br />
a one cent per ounce tax on SSBs only (excludes diet CSDs and RTD teas); a two cent per ounce tax on<br />
all beverages; and a two cent per ounce tax on SSBs only. Given estimated price levels, <strong>the</strong> alternative<br />
taxes lead to significant <strong>in</strong>creases <strong>in</strong> beverage prices and substantial reductions <strong>in</strong><br />
beverage consumption.<br />
The relative decl<strong>in</strong>es <strong>in</strong> consumption are greater for relatively <strong>in</strong>expensive beverages (e.g. CSDs) and<br />
smaller for more expensive beverages (RTD teas and c<strong>of</strong>fees), and <strong>the</strong> decl<strong>in</strong>es <strong>in</strong> SSB consumption<br />
are greater when taxes are applied to SSBs only, given potential substitution to lower priced, untaxed<br />
beverages (see Figure 14).<br />
16 17
Table 2<br />
<strong>Impact</strong> <strong>of</strong> Alternative Beverage <strong>Excise</strong> <strong>Taxes</strong> on Beverage Consumption by Type, Ill<strong>in</strong>ois, 2011<br />
Note: Figures reflect estimated annual consumption, <strong>in</strong> millions <strong>of</strong> gallons, with no tax <strong>in</strong>crease<br />
and follow<strong>in</strong>g <strong>the</strong> tax <strong>in</strong>crease specified <strong>in</strong> first column.<br />
Regular<br />
CSDs<br />
Diet<br />
CSDs<br />
Fruit<br />
Dr<strong>in</strong>ks<br />
Sports<br />
Dr<strong>in</strong>ks<br />
RTD Tea<br />
- Regular<br />
RTD Tea<br />
- Diet<br />
Flavored<br />
Water<br />
No Tax 447.0 181.2 62.3 47.2 27.3 13.1 18.3<br />
Energy<br />
Dr<strong>in</strong>ks<br />
RTD<br />
C<strong>of</strong>fee<br />
Total<br />
15.6 2.4 814.3<br />
Revenue <strong>Impact</strong><br />
The revenue generat<strong>in</strong>g potential <strong>of</strong> beverage excise taxes is considerable. Us<strong>in</strong>g <strong>the</strong> consumption<br />
estimates obta<strong>in</strong>ed above under <strong>the</strong> alternative scenarios and apply<strong>in</strong>g <strong>the</strong> tax modeled <strong>in</strong> each scenario,<br />
we estimate <strong>the</strong> revenue generated by each option. As expected, broader based taxes (those that <strong>in</strong>clude<br />
diet as well as SSBs) generate higher revenues, as do higher taxes (although not proportionately given<br />
<strong>the</strong> additional reductions <strong>in</strong> consumption as <strong>the</strong> tax rises). We estimate that a one-cent per ounce tax<br />
on SSBs only would generate for <strong>the</strong> government <strong>of</strong> Ill<strong>in</strong>ois about $607 million <strong>in</strong> 2011, while a two cent<br />
per ounce tax on SSBs and diet beverages would generate moer than $1.4 billion <strong>in</strong> 2011. The excise tax<br />
revenues generated under each scenario are illustrated <strong>in</strong> Figure 15.<br />
1 Cent - All<br />
1 Cent -<br />
SSBs Only<br />
2 Cents - All<br />
369.6<br />
330.9<br />
292.2<br />
149.8<br />
181.2<br />
118.4<br />
55.4<br />
51.9<br />
48.5<br />
39.8<br />
36.2<br />
32.5<br />
25.0<br />
23.8<br />
22.6<br />
11.9<br />
13.1<br />
10.8<br />
15.7<br />
14.4<br />
13.1<br />
14.9<br />
14.6<br />
14.2<br />
2.3<br />
2.2<br />
2.2<br />
684.4<br />
668.2<br />
554.5<br />
Figure 15<br />
Estimated Revenues, Alternative Tax Scenarios, Ill<strong>in</strong>ois, 2011<br />
Source: Andreyeva, et al., unpublished data.<br />
2 Cents -<br />
SSBs Only<br />
214.8<br />
181.2<br />
41.5<br />
25.1<br />
20.2<br />
13.1<br />
10.5<br />
13.5<br />
2.1<br />
522.1<br />
2 Cents - SSBs Only<br />
$839.2<br />
Figure 14<br />
Estimated SSB Consumption, Alternative Tax Scenarios, Ill<strong>in</strong>ois, 2011<br />
Source: Andreyeva, et al., unpublished data.<br />
2 Cents - All<br />
$1,419.5<br />
600<br />
620.1<br />
1 Cent - SSBs Only<br />
$606.6<br />
522.7<br />
500<br />
473.9<br />
425.2<br />
1 Cent - All<br />
$876.0<br />
Million Gallons<br />
400<br />
300<br />
327.8<br />
$0.0 $400.0 $800.0 $1,200.0 $1,600.0<br />
Millions<br />
<strong>Impact</strong> on Frequency <strong>of</strong> SSB Consumption<br />
200<br />
100<br />
0<br />
No Tax 1 Cent - All 1 Cent -<br />
SSBs Only<br />
2 Cents - All<br />
2 Cents -<br />
SSBs Only<br />
We estimate age- and gender-specific frequency <strong>of</strong> self-reported SSB consumption for Ill<strong>in</strong>ois us<strong>in</strong>g data<br />
from <strong>the</strong> 2007-08 National Health and Nutrition Exam<strong>in</strong>ation Survey (NHANES). Specifically, we estimate<br />
<strong>the</strong> percentage <strong>of</strong> males and females ages 2-19, 20-44, 45-64, and 65 and older consum<strong>in</strong>g SSBs less<br />
than once per week; one or more times per week but less than daily; one to two times per day, and two or<br />
more times per day (assum<strong>in</strong>g 12 ounces consumed per occasion). Tax-<strong>in</strong>duced changes <strong>in</strong> <strong>the</strong> frequency<br />
<strong>of</strong> SSB consumption are estimated for each tax scenario, assum<strong>in</strong>g <strong>the</strong> same price elasticities as used <strong>in</strong><br />
<strong>the</strong> revenue estimation (-0.8 for a broad based tax and -1.2 for an SSB only tax). Given a lack <strong>of</strong> age- and<br />
gender-specific price elasticities, we assumed it to be constant across subpopulations. Figures 16-20<br />
depict <strong>the</strong> predicted changes <strong>in</strong> <strong>the</strong> frequency <strong>of</strong> SSB consumption for age groups 2-19, 20-44, 45-64,<br />
65 and older, and 2 and older.<br />
18 19
Figure 16<br />
Estimated Frequency <strong>of</strong> Weekly SSB Consumption, Alternative Tax Scenarios, Ages 2-19<br />
Figure 19<br />
Estimated Frequency <strong>of</strong> Weekly SSB Consumption, Alternative Tax Scenarios, Ages 65 and Older<br />
Percent Consum<strong>in</strong>g<br />
40.0<br />
35.0<br />
30.0<br />
25.0<br />
20.0<br />
15.0<br />
10.0<br />
5.0<br />
0.0<br />
Basel<strong>in</strong>e<br />
1 Cent - All<br />
1 Cent - SSBs Only<br />
2 Cents - All<br />
2 Cents - SSBs Only<br />
Percent Consum<strong>in</strong>g<br />
70.0<br />
60.0<br />
50.0<br />
40.0<br />
30.0<br />
20.0<br />
10.0<br />
0.0<br />
Basel<strong>in</strong>e<br />
1 Cent - All<br />
1 Cent - SSBs Only<br />
2 Cents - All<br />
2 Cents - SSBs Only<br />
<strong>Impact</strong> on <strong>the</strong> Incidence and Health Care Costs <strong>of</strong> Diabetes<br />
Several studies have demonstrated <strong>the</strong> role <strong>of</strong> SSB consumption <strong>in</strong> development <strong>of</strong> type 2 diabetes<br />
(e.g. Schultze, et al., 2004; Malik, et al., 2010). The CDC estimates that <strong>the</strong> age-adjusted <strong>in</strong>cidence <strong>of</strong><br />
diabetes was 8.8 per 1,000 population 18 to 79 years old <strong>in</strong> 2009 (CDC, 2011). The <strong>in</strong>cidence <strong>of</strong> type<br />
2 diabetes rises dramatically with age, from 4.6 per 1,000 among 18-44 year olds to 15.2 per 1,000<br />
among 45-64 year olds. While still rare, <strong>the</strong> <strong>in</strong>cidence <strong>of</strong> type 2 diabetes among youth (under age 20)<br />
is ris<strong>in</strong>g; based on data from <strong>the</strong> SEARCH Writ<strong>in</strong>g Group (2007), we estimate that <strong>the</strong> <strong>in</strong>cidence is<br />
5 per 100,000. The risk differs across adult population subgroups, with somewhat higher risk for men<br />
than women (9.2 and 8.4 per 1,000, respectively) and significantly higher risks for Blacks and Hispanics<br />
(11.7 and 13.1 per 1,000, respectively) than for Whites (8.5 per 1,000).<br />
Us<strong>in</strong>g data on <strong>the</strong>se risks and <strong>the</strong> age, gender, and racial/ethnic composition <strong>of</strong> <strong>the</strong> Ill<strong>in</strong>ois population,<br />
we estimate that approximately 94,500 new cases <strong>of</strong> diabetes are diagnosed each year <strong>in</strong> Ill<strong>in</strong>ois, with<br />
disproportionately higher shares among m<strong>in</strong>ority populations. Most <strong>of</strong> <strong>the</strong>se new cases are preventable,<br />
<strong>in</strong>clud<strong>in</strong>g through tax-<strong>in</strong>duced reductions <strong>in</strong> SSB consumption. The best cl<strong>in</strong>ical evidence on <strong>the</strong> impact<br />
<strong>of</strong> SSB consumption on diabetes risk comes from <strong>the</strong> prospective cohort study conducted by Schultze<br />
and colleagues (2004). They followed 91,249 women free <strong>of</strong> diabetes and o<strong>the</strong>r chronic diseases at<br />
basel<strong>in</strong>e and found 741 cases <strong>of</strong> type 2 diabetes <strong>in</strong> <strong>the</strong>se women between 1991 and 1999. Of relevance<br />
for our estimates, <strong>the</strong>y found that women who consumed one or more SSBs per day <strong>in</strong>creased <strong>the</strong>ir<br />
risk <strong>of</strong> type 2 diabetes by 83 to 98 percent compared to those consum<strong>in</strong>g less than one per week.<br />
Us<strong>in</strong>g <strong>the</strong>ir age adjusted results, we estimate that <strong>the</strong> relative risks for different frequencies <strong>of</strong> SSB<br />
consumption are 1 (< 1 per week), 1.32 (once or more but less than daily), 1.63 (≥1 but
Reduced Calories Per Day<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
Us<strong>in</strong>g <strong>the</strong> estimates above <strong>of</strong> <strong>the</strong> age- and gender-specific changes <strong>in</strong> SSB consumption frequency, we<br />
estimate <strong>the</strong> daily reduction <strong>in</strong> calories consumed from SSBs for each tax scenario. The estimated<br />
reductions are presented by age and gender <strong>in</strong> Figure 22. Younger men have <strong>the</strong> largest reductions <strong>in</strong><br />
calories due to high SSB consumption. For a one cent per ounce tax on SSBs only, we estimate that<br />
2-19 year old males would consume 46 fewer calories from SSBs daily and that 20-44 year old males<br />
would consume 55 fewer SSB calories per day, compared to 32 and 16 fewer calories for 45-64 year old<br />
and 65 and older males. Among women, <strong>the</strong> reductions would be 36, 38, 22, and 10 calories from SSBs<br />
per day among those ages 2-19, 20-44, 45-64 and 65 and older, respectively. As with SSB consumption,<br />
larger reductions <strong>in</strong> caloric <strong>in</strong>take result from a tax limited to SSBs only, as do higher taxes regardless <strong>of</strong><br />
<strong>the</strong> base on which <strong>the</strong> tax is applied.<br />
Figure 22<br />
Reductions <strong>in</strong> Average Daily Caloric Intake from SSBs by Age and Gender, Alternative Tax Scenarios, Ill<strong>in</strong>ois, 2011<br />
2-19 20-44 45-64 65+ 2-19 20-44 45-64 65+ 2-19 20 -44 45 -64 65+<br />
Male Female Total<br />
1 Cent - All<br />
1 Cent - SSBs Only<br />
2 Cents - All<br />
2 Cents - SSBs Only<br />
We use <strong>the</strong>se estimated reductions <strong>in</strong> average daily caloric <strong>in</strong>take to model <strong>the</strong> impact <strong>of</strong> alternative<br />
beverage taxes on BMI and obesity prevalence. There are two key assumptions <strong>in</strong> translat<strong>in</strong>g reductions<br />
<strong>in</strong> caloric <strong>in</strong>take<br />
1 Cent<br />
to reductions<br />
- All 1<br />
<strong>in</strong><br />
Cent<br />
body<br />
- SSBs<br />
weight<br />
Only<br />
and<br />
2<br />
obesity.<br />
Cents - All<br />
The first<br />
2 Cents<br />
relates<br />
- SSBs<br />
to<br />
Only<br />
<strong>the</strong> extent to which <strong>the</strong> tax<strong>in</strong>duced<br />
reduction <strong>in</strong> calories from SSBs is <strong>of</strong>fset by <strong>in</strong>creases <strong>in</strong> calories from o<strong>the</strong>r sources such as food<br />
and non-taxed caloric beverages like juice and milk. Current research is mixed on <strong>the</strong> extent <strong>of</strong> substitution<br />
<strong>in</strong> response to changes <strong>in</strong> relative beverage prices, <strong>in</strong>clud<strong>in</strong>g those that result from <strong>the</strong> exist<strong>in</strong>g small sales<br />
taxes on various beverages. Fletcher and colleagues (2010), for example, conclude that reductions <strong>in</strong><br />
SSB calories from higher SSB prices are largely <strong>of</strong>fset <strong>in</strong> children and adolescents by <strong>in</strong>creases <strong>in</strong> calories<br />
from o<strong>the</strong>r beverages, particularly whole milk, result<strong>in</strong>g <strong>in</strong> little impact on weight. In contrast, Smith and<br />
colleagues (2010) f<strong>in</strong>d only modest <strong>in</strong>creases <strong>in</strong> calories from o<strong>the</strong>r caloric beverages when SSB calories<br />
fall <strong>in</strong> response to tax-<strong>in</strong>duced SSB price <strong>in</strong>creases. As a result, <strong>the</strong> authors predict that a 20 percent tax<br />
on SSBs would reduce obesity prevalence by 3 percentage po<strong>in</strong>ts <strong>in</strong> adults and 2.9 percentage po<strong>in</strong>ts <strong>in</strong><br />
children. These are substantial reductions.<br />
Pounds<br />
Research f<strong>in</strong>d<strong>in</strong>gs on <strong>the</strong> impact <strong>of</strong> exist<strong>in</strong>g small taxes on weight outcomes are generally consistent with<br />
Smith et al., (2010) and suggest limited BMI effects <strong>of</strong> small taxes, but that po<strong>in</strong>t estimates imply that<br />
large taxes could lead to sizable reductions <strong>in</strong> weight and obesity, particularly <strong>in</strong> higher risk populations<br />
(Powell and Chriqui, <strong>in</strong> press). To be conservative, we assume that half <strong>of</strong> <strong>the</strong> tax-<strong>in</strong>duced reductions <strong>in</strong><br />
calories consumed from SSBs will be <strong>of</strong>fset by <strong>in</strong>creases <strong>in</strong> calories from o<strong>the</strong>r sources. If <strong>the</strong>re is less<br />
compensation, <strong>the</strong>n <strong>the</strong> impact <strong>of</strong> <strong>the</strong> alternative taxes on obesity prevalence and related health care<br />
costs will be greater.<br />
The second key assumption relates to translat<strong>in</strong>g a reduction <strong>in</strong> net caloric <strong>in</strong>take to weight change<br />
(i.e. calories to pounds). There is considerable confusion around <strong>the</strong> extent to which reduced calories<br />
lead to reductions <strong>in</strong> weight (Katan and Ludwig, 2010). We use <strong>the</strong> estimates developed by Hall and<br />
colleagues (Hall, et al., 2009; Hall and Jordan, 2008) <strong>in</strong> <strong>the</strong>ir models that account for <strong>the</strong> human<br />
physiology <strong>of</strong> energy regulation. Their models predict that a reduction <strong>in</strong> caloric <strong>in</strong>take <strong>of</strong> about 10<br />
calories per day will reduce weight by about one pound <strong>in</strong> <strong>the</strong> steady state.<br />
Based on <strong>the</strong>se assumptions, we estimate that <strong>the</strong> alternative beverage taxes would lead to significant<br />
reductions <strong>in</strong> average body weight at <strong>the</strong> population level, with greater reductions among young males<br />
given <strong>the</strong>ir greater frequency <strong>of</strong> SSB consumption. The estimated age- and gender-specific reductions <strong>in</strong><br />
average body weight are shown <strong>in</strong> Figure 23. We estimate that a one-cent tax on SSBs only would reduce<br />
average body weight among Ill<strong>in</strong>oisans ages two and older by about 1.7 pounds.<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0.0<br />
2.3<br />
4.6<br />
2.7<br />
5.5<br />
1.6<br />
Figure 23<br />
Reductions <strong>in</strong> Body Weight by Age and Gender, Alternative Tax Scenarios, Ill<strong>in</strong>ois, 2011<br />
3.2<br />
0.8<br />
1.6<br />
1.8<br />
3.6<br />
1.9<br />
3.8<br />
2-19 20-44 45-64 65+ 2-19 20-44 45-64 65+ 2-19 20-44 45-64 65+<br />
Male Female Total<br />
1.1<br />
2.2<br />
0.5<br />
1.0<br />
1 Cent - All 1 Cent - SSBs Only 2 Cents - All 2 Cents - SSBs Only<br />
2.1<br />
4.1<br />
2.3<br />
4.7<br />
1.3<br />
2.7<br />
0.6<br />
1.3<br />
1 Cent - All<br />
1 Cent - SSBs Only<br />
2 Cents - All<br />
2 Cents - SSBs Only<br />
24 25
<strong>Impact</strong> on Obesity and Obesity-Related Health Care Costs<br />
Us<strong>in</strong>g <strong>the</strong> estimated reductions <strong>in</strong> weight described above, we fur<strong>the</strong>r estimate <strong>the</strong> impact <strong>of</strong> alternative<br />
beverage taxes on <strong>the</strong> prevalence <strong>of</strong> obesity <strong>in</strong> Ill<strong>in</strong>ois and obesity-related health care costs. Data on<br />
adult obesity rates by age and gender come from <strong>the</strong> 2009 Behavioral Risk Factor Surveillance System<br />
data for Ill<strong>in</strong>ois, with <strong>the</strong> age-specific rates adjusted <strong>in</strong> proportion to <strong>the</strong> gender-specific rates to produce<br />
estimates for males and females ages 18-44, 45-64, and 65 and older. Gender specific estimates <strong>of</strong><br />
obesity prevalence for children ages 2-17 are obta<strong>in</strong>ed us<strong>in</strong>g data from <strong>the</strong> 2007 National Survey <strong>of</strong><br />
Children’s Health (S<strong>in</strong>gh, et al., 2010; for gender specific rates for youth ages 10-17), and <strong>the</strong> 2007-<br />
2008 NHANES (assum<strong>in</strong>g that <strong>the</strong> relative rates for 2-9 year olds and 10-17 year olds nationally apply<br />
to Ill<strong>in</strong>ois children). Us<strong>in</strong>g this approach, we estimate that 25.2 percent <strong>of</strong> <strong>the</strong> Ill<strong>in</strong>ois population ages<br />
two and older is obese, with age specific prevalence rates <strong>of</strong> 17.5, 24.5, 33.0, and 24.7 percent among<br />
those ages 2-17, 18-44, 45-64, and 65 and older, respectively. Obesity rates among males <strong>in</strong> each age<br />
group are about 10 percent higher than among females.<br />
We use age- and gender-specific average height data from NHANES to translate <strong>the</strong> predicted reductions<br />
<strong>in</strong> weight <strong>in</strong>to reductions <strong>in</strong> age- and gender-specific BMI. We fur<strong>the</strong>r assume that reductions <strong>in</strong> BMI<br />
that result from <strong>the</strong> alternative taxes will move a fraction (1/5th) <strong>of</strong> people with BMI <strong>in</strong> <strong>the</strong> obese<br />
range (≥ 30) to <strong>the</strong> non-obese range. Given <strong>the</strong>se assumptions, we estimate age and gender specific<br />
reductions <strong>in</strong> obesity prevalence that would result from <strong>the</strong> alternative beverage taxes. These estimates<br />
are shown <strong>in</strong> Figure 24.<br />
The alternative beverage taxes would lead to significant reductions <strong>in</strong> obesity prevalence. For example,<br />
we estimate that a one-cent tax on SSBs only would reduce obesity prevalence among 12-17 year<br />
olds to 15.9 percent, imply<strong>in</strong>g 45,000 fewer obese children <strong>in</strong> Ill<strong>in</strong>ois. Similarly, this tax would reduce<br />
obesity prevalence among 18-44 year olds to 22.7 percent and among 45-64 year olds to 31.6 percent,<br />
reduc<strong>in</strong>g <strong>the</strong> number <strong>of</strong> obese adults <strong>in</strong> <strong>the</strong>se age groups by about 85,000 and 45,000, respectively.<br />
The overall obesity rate <strong>in</strong> Ill<strong>in</strong>ois would fall from 25.2 percent to 23.7 percent, reflect<strong>in</strong>g a more than<br />
185,000 reduction <strong>in</strong> <strong>the</strong> number <strong>of</strong> obese Ill<strong>in</strong>oisans. Aga<strong>in</strong>, SSB only taxes produce larger reductions <strong>in</strong><br />
obesity prevalence than broader based taxes that <strong>in</strong>clude diet beverages, and higher taxes lead to more<br />
substantial decl<strong>in</strong>es <strong>in</strong> obesity rates.<br />
F<strong>in</strong>ally, given <strong>the</strong> considerable health care costs estimated to result from obesity, we use <strong>the</strong>se<br />
reductions <strong>in</strong> obesity prevalence to estimate <strong>the</strong> impact <strong>of</strong> alternative beverage taxes on health care<br />
costs attributable to obesity <strong>in</strong> Ill<strong>in</strong>ois. A grow<strong>in</strong>g literature demonstrates that obese <strong>in</strong>dividuals spend<br />
significantly more on health care to treat <strong>the</strong> consequences <strong>of</strong> <strong>the</strong>ir obesity (F<strong>in</strong>kelste<strong>in</strong>, et al., 2009;<br />
Wee et al., 2005). To estimate <strong>the</strong> impact <strong>of</strong> <strong>the</strong> tax <strong>in</strong>duced reductions <strong>in</strong> obesity prevalence on health<br />
care spend<strong>in</strong>g, we use age and gender specific adult cost estimates from Wee and colleagues (2005),<br />
updated for <strong>in</strong>flation us<strong>in</strong>g <strong>the</strong> Medical Care Price Index. They estimate that obesity-related health care<br />
costs are higher for women than for men and that <strong>the</strong>se costs rise with age for both genders.<br />
<strong>the</strong> cumulative effects <strong>of</strong> sav<strong>in</strong>gs <strong>in</strong> health care spend<strong>in</strong>g will grow; assum<strong>in</strong>g that <strong>the</strong> annual cost<br />
sav<strong>in</strong>gs are constant over time a one-cent SSB only tax would save more than $1.5 billion <strong>in</strong> health<br />
care spend<strong>in</strong>g <strong>in</strong> Ill<strong>in</strong>ois over <strong>the</strong> next decade. Given <strong>the</strong> higher prevalence <strong>of</strong> obesity <strong>in</strong> lower-<strong>in</strong>come<br />
populations, a disproportionate reduction <strong>in</strong> obesity-related health care spend<strong>in</strong>g would be seen <strong>in</strong> <strong>the</strong><br />
state’s Medicaid program. As with <strong>the</strong> reductions <strong>in</strong> diabetes, <strong>the</strong> total benefits for <strong>the</strong> Ill<strong>in</strong>ois economy<br />
would be substantially higher and <strong>in</strong>clude reductions <strong>in</strong> o<strong>the</strong>r costs associated with obesity, <strong>in</strong>clud<strong>in</strong>g<br />
reduced productivity, absenteeism, and disability.<br />
35.0%<br />
30.0%<br />
25.0%<br />
20.0%<br />
15.0%<br />
10.0%<br />
5.0%<br />
0.0%<br />
16.8%<br />
2 Cents - SSBs Only<br />
23.5%<br />
32.8%<br />
25.2%<br />
15.0%<br />
21.9%<br />
30.4%<br />
23.2%<br />
15.9%<br />
22.7%<br />
31.6%<br />
2-17 18-44 45-64 65+ 2-17 18-44 45-64 65+ 2-17 18-44 45-64 65+<br />
Male<br />
Figure 24<br />
Obesity Prevalence Rates by Age and Gender, Alternative Tax Scenarios, Ill<strong>in</strong>ois, 2011<br />
Note: <strong>the</strong> percentages shown on <strong>the</strong> bar graphs reflect <strong>the</strong> estimated obesity prevalence rate<br />
that would result from a one-cent per ounce tax on SSBs only.<br />
Female<br />
Total<br />
Basel<strong>in</strong>e 1 Cent - All 1 Cent - SSBs Only 2 Cents - All 2 Cents - SSBs Only<br />
24.0%<br />
$301.6<br />
Basel<strong>in</strong>e<br />
1 Cent - All<br />
1 Cent - SSBs Only<br />
2 Cents - All<br />
2 Cents - SSBs Only<br />
Figure 25<br />
Reductions <strong>in</strong> Obesity-Related Health Care Costs, Alternative Tax Scenarios, Ill<strong>in</strong>ois, 2011<br />
Based on <strong>the</strong> recent study by Sk<strong>in</strong>ner and colleagues (2008) that found no excessive health care costs<br />
for overweight children relative to normal weight peers, we assume no reduction <strong>in</strong> health care costs for<br />
<strong>the</strong> youngest age group (ages 2-17). As a result, our estimates will be conservative with respect to <strong>the</strong><br />
long term cost sav<strong>in</strong>gs that result from <strong>the</strong> tax <strong>in</strong>duced decl<strong>in</strong>es <strong>in</strong> SSB consumption and obesity. That<br />
is, <strong>the</strong> reductions <strong>in</strong> obesity among young people will lead to significant reductions <strong>in</strong> future health care<br />
costs caused by obesity.<br />
The estimated health care cost sav<strong>in</strong>gs <strong>in</strong> Ill<strong>in</strong>ois <strong>in</strong> 2011 from tax-<strong>in</strong>duced reductions <strong>in</strong> obesity are<br />
shown <strong>in</strong> Figure 25. We estimate that a one-cent tax on SSBs only, for example, would reduce health<br />
care spend<strong>in</strong>g attributable to obesity by more than $150 million <strong>in</strong> <strong>the</strong> first year alone. Over time,<br />
1 Cent - SSBs Only<br />
26 27<br />
2 Cents - All<br />
1 Cent - All<br />
$100.5<br />
$150.8<br />
$201.0<br />
$0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0<br />
Millions
Section IV<br />
Discussion<br />
The <strong>in</strong>creas<strong>in</strong>g recognition <strong>of</strong> <strong>the</strong> role <strong>of</strong> sugar-sweetened beverages (SSBs) <strong>in</strong><br />
contribut<strong>in</strong>g to <strong>the</strong> grow<strong>in</strong>g obesity epidemic has spurred <strong>in</strong>terest <strong>in</strong> policy and o<strong>the</strong>r<br />
<strong>in</strong>terventions that aim to reduce SSB consumption. Given <strong>the</strong> demonstrated effectiveness<br />
<strong>of</strong> <strong>in</strong>creased tobacco taxes <strong>in</strong> reduc<strong>in</strong>g cigarette smok<strong>in</strong>g and o<strong>the</strong>r tobacco product<br />
use, many have proposed SSB taxes that would lead to sizable <strong>in</strong>creases <strong>in</strong> prices as a<br />
promis<strong>in</strong>g policy option for curb<strong>in</strong>g obesity and its health and economic consequences.<br />
To date, however, exist<strong>in</strong>g SSB taxes are mostly small sales taxes that are applied to both<br />
sugar-sweetened and diet beverages. Research assess<strong>in</strong>g <strong>the</strong> impact <strong>of</strong> <strong>the</strong>se small taxes<br />
generally f<strong>in</strong>ds that <strong>the</strong>y have modest effects on beverage consumption and a limited<br />
impact on weight. At <strong>the</strong> same time, estimates from <strong>the</strong>se studies suggest that larger taxes<br />
would have a substantial impact on <strong>the</strong> prevalence <strong>of</strong> obesity at <strong>the</strong> population level.<br />
1 Cent - All<br />
1 Cent -<br />
SSBs Only<br />
2 Cents - All<br />
2 Cents -<br />
SSBs Only<br />
Reduction<br />
<strong>in</strong> Number<br />
<strong>of</strong> Obese<br />
Youth (2-17)<br />
6.2%<br />
9.3%<br />
12.3%<br />
18.5%<br />
Reduction<br />
<strong>in</strong> Number<br />
<strong>of</strong> Obese<br />
Adults (18+)<br />
3.5%<br />
5.2%<br />
7.0%<br />
10.5%<br />
Table 4<br />
Estimated <strong>Impact</strong> <strong>of</strong> Alternative Beverage <strong>Excise</strong> <strong>Taxes</strong>, Ill<strong>in</strong>ois, 2011<br />
Reduction<br />
<strong>in</strong> Number<br />
<strong>of</strong> Obese<br />
Ill<strong>in</strong>oisans<br />
123,418<br />
185,127<br />
246,836<br />
370,253<br />
Reduction<br />
<strong>in</strong> Diabetes<br />
Incidence<br />
2,294<br />
3,442<br />
4,591<br />
6,885<br />
Reduction<br />
<strong>in</strong> Health<br />
Care Costs<br />
<strong>of</strong> Diabetes<br />
(millions)<br />
$13.8<br />
$20.7<br />
$27.6<br />
$41.3<br />
Reduction<br />
<strong>in</strong> Obesity-<br />
Related<br />
Health Care<br />
Costs (millions)<br />
$100.5<br />
$150.8<br />
$201.0<br />
$301.6<br />
New Tax<br />
Revenues<br />
(millions)<br />
$876.1<br />
$606.7<br />
$1,419.6<br />
$839.3<br />
Given <strong>the</strong> potential for SSB taxes to reduce obesity, we use <strong>the</strong> best available data and research-based<br />
evidence to estimate <strong>the</strong> impact <strong>of</strong> alternative beverage taxes <strong>in</strong> Ill<strong>in</strong>ois. Specifically, we consider four<br />
alternative beverage taxes – a one cent per ounce excise tax on SSBs and <strong>the</strong>ir diet versions (i.e.,<br />
all beverages); a one cent per ounce excise tax on SSBs only; a two cent per ounce excise tax on all<br />
beverages; and a two cent per ounce excise tax on SSBs only. Us<strong>in</strong>g recent data, we predict <strong>the</strong>ir impact<br />
on overall beverage consumption, tax revenues, age and gender-specific frequency <strong>of</strong> SSB consumption,<br />
average daily caloric <strong>in</strong>take, body weight, body mass <strong>in</strong>dex (BMI), obesity prevalence diabetes <strong>in</strong>cidence,<br />
and health care costs <strong>of</strong> diabetes and obesity. Table 3 below summarizes our estimates.<br />
Given <strong>the</strong> cont<strong>in</strong>ued reduction <strong>in</strong> SSB consumption follow<strong>in</strong>g <strong>the</strong> alternative beverage taxes, <strong>the</strong> impact<br />
<strong>of</strong> <strong>the</strong> tax will grow over time as additional new diabetes cases will be prevented and as <strong>the</strong> long-term<br />
costs result<strong>in</strong>g from childhood obesity are averted. To <strong>the</strong> extent that a portion <strong>of</strong> <strong>the</strong> new revenues<br />
generated by <strong>the</strong> tax are used to support obesity prevention and reduction programs <strong>in</strong> Ill<strong>in</strong>ois, <strong>the</strong> future<br />
decl<strong>in</strong>es <strong>in</strong> obesity prevalence and <strong>the</strong> result<strong>in</strong>g disease and costs will be even larger.<br />
In summary, sizable new SSB taxes would be a w<strong>in</strong>-w<strong>in</strong> for Ill<strong>in</strong>ois – <strong>the</strong>y would generate considerable<br />
new revenues, and lead to reductions <strong>in</strong> SSB consumption, obesity, and <strong>the</strong> result<strong>in</strong>g disease burden<br />
and health care costs. As seen with tobacco tax <strong>in</strong>creases that earmarked a portion <strong>of</strong> new revenues<br />
for comprehensive tobacco prevention and cessation programs that fur<strong>the</strong>r reduced tobacco use and<br />
its consequences, us<strong>in</strong>g <strong>the</strong> same approach with SSB tax revenues would lead to fur<strong>the</strong>r reductions <strong>in</strong><br />
obesity while at <strong>the</strong> same time <strong>in</strong>creas<strong>in</strong>g public support for such taxes.<br />
28 29
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