Obesity: distributional effects of sweetener taxes

Aim While sweetener taxes are prevalent worldwide to mitigate the excess consumption of sweeteners that are believed to contribute to obesity, in the United States, a sweetener tax is less effective if applied to aggregate sweetener consumption rather than only to consumption by obese consumers. The demand for sweeteners is not equal across all consumers; some consumers under-consume sweeteners, while others over-consume. We evaluate the distributional effect of an 11 cents/kg tax on both sugar and high fructose corn syrup (HFCS) for consumers as a whole compared to only those consumers who are obese. Methods We use a demand model that is based on classical welfare economics to estimate the distributional effects of a sweetener tax in the United States on both over-consumers and under-consumers of sweeteners. We also estimate the impact of a selective sweetener tax only on over-consumers. Empirical results An 11 cents/kg tax on consumers will reduce sugar and HFCS consumption for both groups of consumers and cost US consumers of sweeteners a total of US$989 million/year based on the AHA-standard (sugar over-consumers: US$619, under-consumers: US$14; HFCS over-consumers: US$349, under-consumers: US$7). US consumers will lose US$976 million/year based on the FDA-standard (sugar over-consumers: US$568, under-consumers: US$58; HFCS over-consumers: US$322, under-consumers: US$28). For a selective tax only on over-consumers (inelastic [-0.35] demand), the tax will range between US$1.08 and US$1.26 per kilogram of sugar and between US$1.26 and US$1.43 per kilogram of HFCS. Conclusion Aggregate sweetener taxes cause a welfare loss to both under-consumers and over-consumers of sweeteners. However, if a selective sweetener tax is imposed only on over-consumers of sweeteners (obese adults), a much higher tax would be necessary, depending on the percentage of population of under-consumers. A selective tax would also be excessively regressive on lower-income people who often over-consume sweeteners.