What Happens When You Tax Junk Food?
September 4, 2014
Health organizations and lawmakers across the country have sought to target junk food and curb obesity by taxing sweets, soft drinks and other unhealthy foods. Those in favor of the laws see them as promoting public health, while opponents -- such as Joseph Thorndike of TaxAnalysts.com -- would call them paternalistic.
Thorndike reports on a study from researchers at Cornell University. The researchers noted how many anti-obesity activists have proposed and instituted soft drink taxes, yet they noticed a major hole in the policy debate: everyone simply assumed the soft drink tax would reduce purchases without analyzing actual consumer behavior.
The Cornell study took 113 households in a small American city and studied their grocery purchases for one month. Then, half of them were randomly assigned a 10 percent tax on sugar-sweetened beverages (SSBs) and other junk foods when they shopped at three grocery stores in the area. After studying their resulting purchases over a six-month period, the researchers found:
- Taxes on sweets encouraged substitution. In this case, shoppers substituted beer for soft drinks, and the households that previously had purchased beer bought even more beer after soft drinks were taxed.
- The total fluid ounces of beverages purchased by shoppers remained steady throughout the entire study. There was a drop in unhealthy drink purchases during the first month, but consumers resumed their soft drink purchases thereafter, with no decrease in purchases at the three-month or six-month marks.
Are the results surprising? Thorndike says not at all: When the government taxes one thing but not a similar thing, people alter their behaviors in order to escape the tax.
Source: Joseph J. Thorndike, "When Do-Gooder Taxes Don't Do Good," TaxAnalysts.com, September 2, 2014; Brian Wansink et al., "From Coke to Coors: A Field Study of a Fat Tax and its Unintended Consequences," Cornell University, July 29, 2014.
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