The researchers, from Iowa State University, wrote that the idea of taxing sweetener consumption at the processing level has received relatively little attention compared to the effects of taxing finished products, and argue that taxing sweetener inputs would induce manufacturers to reduce their use.
The researchers, professors John Beghin and Helen Jensen, from the university’s Department of Economics, said that they were not advocating applying any particular tax, but wanted to work out how and where a sweetener tax would be most effective.
"We are not saying, ‘To resolve obesity, here is what you should do,'" said Beghin. "In that sense, we are not advocating anything. We are saying, 'Given that you are considering a panoply of tax instruments, and there is a possibility of a soda tax, is there a better way to use that idea?'"
Research into the effect of a soda tax in limiting consumption of sugar-sweetened soft drinks remains controversial. Some researchers claim that the percentage of energy derived from soft drinks has been falling, making it difficult to blame sugary drinks for rising obesity rates, while others claim that even a small amount of weight loss could be beneficial for many Americans, and sugary drinks are disproportionately consumed by overweight people.
However, the researchers said they were not concerned with drawing conclusions about whether taxes would affect obesity rates, but concentrated instead on consumption of calories from sweetened foods and beverages, and the level of disruption to the consumer.
Jensen said: "This is motivated by a lot of ideas out there that say we could tax sweetened products. We wanted to see what the effect of such a tax would be and, alternatively, if you imposed a tax on ingredients, what would be the effect of that."
The researchers examined published data on sweetener inputs across different food industry sectors, modeling supply decisions, examining how processors might transfer the input tax to consumers, and modeling demand from consumers for products high in caloric sweeteners.
They concluded that a tax on sweeteners would have a smaller impact on consumers’ real expenditures than a tax on final products and would be a more efficient way to reduce consumers’ consumption of caloric sweeteners.
"Taxing the processing ingredients makes more sense when compared with taxing the end product," said Beghin. "You can abate the same number of calories without having consumers face such high prices."
The researchers added that any type of tax on sweetened foods would be regressive, having a larger impact on poorer consumers, whether through taxing finished products or inputs. However, they point out that this does not take into account the potential health benefits of consuming fewer calories in the form of added sugars, which could prove relatively more beneficial for lower income groups.
Source: Contemporary Economic Policy
“Taxing Sweets: Sweetener Input Tax or Final Consumption Tax?”
Authors: Zhen Miao, John Beghin and Helen Jensen