The Pros and Cons of Taxing Sweetened Beverages Based on Sugar Content

37 Pages Posted: 8 Apr 2017

See all articles by Norton Francis

Norton Francis

Office of Revenue Analysis DC OCFO

Donald B. Marron

The Urban Institute

Kim S. Rueben

Tax Policy Center

Date Written: Decemeber 6, 2016

Abstract

Governments are starting to use taxes to discourage consumption of sugary drinks. Those taxes typically scale with drink volume. But sugar content varies widely. This report analyses the potential benefits and costs of scaling these taxes to sugar content. Taxes based on sugar content reduce consumption more effectively than taxes on volume. They also encourage businesses to reduce sugar in their products. Broad-based volume or sales taxes on all soft drinks, however, raise revenue more efficiently. Policymakers thus face trade-offs between using these taxes to raise revenue and to discourage sugar consumption.

Keywords: behavioral economics, paternalism, sin tax, Pigouvian tax, soda tax, sugar tax, obesity, nutrition policy

JEL Classification: H2, D6, Q18

Suggested Citation

Francis, Norton and Marron, Donald B. and Rueben, Kim S., The Pros and Cons of Taxing Sweetened Beverages Based on Sugar Content (Decemeber 6, 2016). Available at SSRN: https://ssrn.com/abstract=2947716 or http://dx.doi.org/10.2139/ssrn.2947716

Norton Francis

Office of Revenue Analysis DC OCFO ( email )

441 4th St. NW Suite 410 South
Washington, DC 20001
United States

Donald B. Marron (Contact Author)

The Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
United States

Kim S. Rueben

Tax Policy Center ( email )

Urban Institute
2100 M Street NW
Washington, DC 20009
United States

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