Employment Impact of Sugar-Sweetened Beverage Taxes

Abstract

In recent years, evidence on the role of sugar-sweetened beverage (SSB) consumption in causing obesity, particularly among children, has strengthened. Given the success of increased tobacco taxes in reducing tobacco use and its consequences, many have called for new, sizable taxes on SSBs. While most states apply sales taxes to SSBs, these taxes tend to be modest and apply to  non-SSBs, resulting in little impact on consumption and weight outcomes. Over the past year, several proposals for significant--as much as 2 cents per ounce, which is almost 25 cents for each can of soda--SSB-specific taxes have been introduced at state and local levels. Recent research suggests that these taxes, by significantly increasing the prices of SSBs relative to other beverages, would lead to significant reductions in consumption and to improved weight outcomes, particularly among children and those on low incomes. To date, none of these proposals has been successful, at least in part due to the lobbying efforts of the soft drink industry.

Several arguments have been used in opposition to these proposals, including the argument that SSB taxes will result in considerable job losses as consumers cut back on SSB consumption. Given the recent recession and slow recovery, the jobs argument has resonated well with policymakers. However, it is subject to several flaws. First, it almost certainly overstates the losses within the beverage industry given that some reductions in SSB consumption will be offset by increases in consumption of other beverages, often produced by the same companies. Second, any job losses in the beverage sector will be offset by increases elsewhere as the money consumers would have spent on beverages is spent on other goods and services. Third, new tax revenues will be spent on public programs, particularly in the labor intensive health and education sectors, including programs aimed at promoting healthy eating and increased activity. Evidence demonstrating the employment impact of SSB taxes is critically needed to inform policymakers considering such taxes.

Our research question: What is the net employment impact of reductions in SSB consumption that would result from significant taxes on SSBs?

Following the approach successfully used to estimate the net employment impact of tobacco control policies, this project will adapt the REMI (Regional Economic Models, Inc.) model to assess the net employment impact of reductions in sugar-sweetened beverage (SSB) consumption resulting from state SSB taxes. This will be done for five states (California, Illinois, New York and two to be identified based on promising SSB tax proposals). Reductions in consumer spending on beverages (accounting for substitution to non-SSBs) will be calibrated based on both own-price and cross-price elasticities and will be allocated to spending on other goods and services following existing expenditure patterns. Government spending of revenues generated by an SSB tax will be allocated based on existing expenditure patterns and, alternatively, based on obesity prevention program spending.

Affiliated Center/Program

Principal investigator
Co-investigator(s)
Funding Agency

Robert Wood Johnson Foundation Healthy Eating Research 2010 Rapid-Response Grant

Start date
01/15/2011
End date
01/14/2012
Total award
$149,953