Taxing sugar leads to significant decrease in consumption, new study shows

Taxing sugar in a range of foods would have a greater impact in reducing sugar consumption and caloric intake than imposing similar taxes on specific products, like soft drinks, according to a recent study published in the Journal of Health Economics.

“The big takeaway is that consumers will respond to taxes but that the response will vary with the type of tax,” says Matthew Harding, associate professor of economics and statistics at the University of California-Irvine and a co-author of the research. “In particular, (ingredient) taxes are more effective because they are targeting an (ingredient) across all products so it prevents people from substituting from a taxed product to an untaxed product, which may not necessarily improve the nutrition intake.” In the study, researchers compared both specific taxes on products – such as soda pop and packaged meals – and broad taxes on ingredients like sugar that's contained in different foods. The researchers did not distinguish between natural sugars, such as those found in fruit and milk, and added sugars, which are used to flavor cookies, cakes, fruit pies, some beverages and other products. To study the effect of sugar taxes, the researchers conducted a simulation by using a statistical model based on 123 million food purchase transactions from U.S. grocery stores. The researchers estimated how consumers would respond to changes in the prices of hundreds of thousands of products grouped into about 30 categories, such as baked goods, fruits and vegetables and also how they would substitute between food categories when prices in one category change. This allowed the researchers to simulate the impact of different types of food taxes. The researchers also ran a model that exempted fruits and vegetables from the sugar tax and found similar results to the findings of the main study: Taxing sugar could have a significant impact on consumption.

RELATED: Ridiculously simple ways to lower your taxes

5 ridiculously simple ways to lower your taxes
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5 ridiculously simple ways to lower your taxes

1. Contribute more to a retirement account

If you put money into a traditional IRA or 401(k) plan, you'll benefit in two ways. First, you'll get the financial security that comes with having savings available in retirement, and the earlier in life you start contributing, the more opportunity you'll give your money to grow. But you'll also benefit from a tax perspective, because the amount you contribute will go in pre-tax. What this means is that if you make $50,000 a year but put $5,000 into your 401(k), you'll only pay taxes on $45,000 of income. Talk about a win-win! via Getty Images

2. Donate items you no longer use

Is your basement or hall closet overflowing with clothing, tools, and gadgets you don't need? If you donate those items to a registered charity, you'll get to claim a deduction on your taxes. All you need to do is obtain an itemized receipt of what you give away to verify your donation, and you're all set.

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3. Open a flexible spending account

Medical care can be a huge expense for some families. Americans spent an estimated $416 billion on out-of-pocket medical expenses in 2014, and that number is expected to climb to $608 billion by 2019. But if you sign up for a healthcare flexible spending account (FSA), you'll get to pay for eligible medical expenses, like copays and prescription drugs, with pre-tax dollars. For 2016, you can allocate up to $2,550 to an FSA, which means that if your effective tax rate is 25%, you'll save $637 by contributing the maximum. But don't make the mistake of overfunding your FSA. The money you contribute goes in on a use-it-or-lose-it basis, so if you put in the full $2,550 but only rack up $2,000 in eligible expenses, you'll have to kiss that remaining $550 goodbye.

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4. Use pre-tax dollars to pay for child care

Childcare is one of the greatest expenses families with young children face. The average American household currently spends $10,192 a year on full-time day care center care, $7,700 a year on regular after-school babysitting, and $28,900 on a full-time nanny. The good news, however, is that you can shave a fair amount of money off your tax bill by opening a dependent care FSA. Similar to a healthcare FSA, a dependent care FSA allows you to allocate pre-tax dollars to pay for eligible child care expenses, which include preschool and summer camp. For 2016, a couple filing a joint tax return can contribute up to $5,000 a year in pre-tax dollars. If you max out that limit and your effective tax rate is 25%, you'll save $1,250 in taxes. The only catch is that like a healthcare FSA, if you end up spending less during the year on eligible expenses than what you put in, you'll forfeit your remaining balance.

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5. Sign up for commuter benefits

Traffic and rail delays can be a huge source of daily aggravation. But if your commute can't serve the purpose of helping you relax and ease in and out of your workday, it can at least help you lower your taxes. All you need to do is sign up for commuter benefits through your employer, and you'll get to use pre-tax dollars to pay for the costs you already incur. For 2016, you can allocate up to $255 per month in pre-tax dollars for transit and up to $255 a month for parking for a combined total of $510. If you hit that maximum and your effective tax rate is 25%, you'll save $1,530 a year on your taxes.

Nobody likes paying taxes, and there's certainly no reason to pay more than you have to. With a few smart moves, you can lower the amount you ultimately fork over to the IRS and keep more money in your pocket.

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“Our main finding is that (ingredient)-specific taxes have much larger effects on nutrition than do the product-specific taxes we study,” the study says. A 20 percent tax on sugar reduces caloric intake by more than 18 percent, according to the research. Meanwhile, a 20 percent tax specifically on soda decreases caloric intake by about 5 percent. “Overall, our estimates suggest that the use of nutrient-specific taxes could have an important effect in inducing healthier purchasing behavior among consumers,” the study concludes. The research paper notes that excessive consumption of added, non-natural sugars is linked to a host of negative health effects in the U.S. Those effects include obesity and a host of chronic health conditions such as arthritis, asthma, depression, diabetes, cardiovascular disease, high blood pressure and colorectal, kidney, breast and prostate cancer.

[See: The 12 Best Diets to Prevent and Manage Diabetes.]

Harding and his study co-author, Michael Lovenheim, an associate professor in the department of policy analysis and management at Cornell University, say they are unaware of any local governments that impose an ingredient tax. In recent years, nine U.S. municipalities have adopted taxes on sugar-sweetened sodas or sodas and other beverages, such as non-calorically sweetened beverages that have artificial or natural non-caloric sweeteners, says Lynn Silver, senior adviser at the Public Health Institute in Oakland, California. Such beverages are one of the top sources of added sugars for U.S. residents, according to the Centers for Disease Control and Prevention. These drinks are enormously popular in the U.S.; from 2011 to 2014, 63 percent of youths and 49 percent of adults nationwide drank a sugar-sweetened beverage on any given day, according to the CDC.

One of the municipalities that has imposed taxes on the sale of sugary beverages is Berkeley, California. Effective March 1, 2015, the city began imposing a tax of one cent per ounce on sugar-sweetened beverages; the revenue raised by the tax funds children’s health programs. After the tax took effect, sales of sugar-sweetened beverages dropped by about 10 percent, according to a 2017 study published in PLOS Medicine. There was no evidence that the tax decreased overall beverage sales for grocery stores, the study says. The research suggests that taxes on sugary beverages “may be effective in shifting consumers to healthier beverages without causing undue economic hardship and while raising revenue for social objectives,” the study says.

Dramatic increases in the consumption of added sugar among U.S. residents have contributed to obesity rates, research suggests. In the late 1970s, the obesity rate in the country was more than 14.5 percent. It increased to more than 22 percent by the early 1990s, and today, more than two-thirds of U.S. residents – 36 percent – are obese, according to the study in the Journal of Health Economics. The uptick in obesity corresponds to an increase in sugar consumption in the U.S. during the past three decades. Since 1977, the amount of added sugars consumed by U.S. adults has increased by more than 30 percent, according to the Obesity Society.

[See: These Healthy Seasonings are Tasty Substitutes for Sugar and Salt.]

Limiting your sugar intake can help ward off obesity, cardiovascular problems and other health issues, research suggests. The American Heart Association recommends that women and children over the age of 2 in the U.S. consume no more than 100 calories daily from added sugars, or about 6 teaspoons. Men in the U.S. should ideally have no more than 150 calories daily from added sugars, the equivalent of 9 teaspoons. Yet, the average American consumes more than 22 teaspoons of sugar daily, which translates to 355 calories.

Cutting down on consumption of added sugar means making better eating choices, since such sugar is common in many popular foods. “Consuming excess added sugar is too easy – cutting back permanently is one of the smartest gifts you can give yourself,” says Lise Gloede, a registered dietitian based in Arlington, Virginia. “Added sugars are in lots of foods, and Americans as a whole still consume too much added sugars from sweetened beverages, baked goods, sweets, snack foods and desserts.” These eating habits lead to weight gain, which in turn contributes to Type 2 diabetes, high blood pressure, high cholesterol, stroke, fatty liver disease and other conditions, she says. Cutting added sugar from your diet can have a dramatic positive effect on your weight and health, Gloede says.

[See: Got Diabetes? Why You Must Protect Your Feet.]

John Edgell, a longtime congressional staffer who lives in the District of Columbia, learned the benefits of giving up sugar after his doctor advised him he needed to get his blood glucose level down. Edgell swapped out what had been his usual breakfast of two glasses of orange juice, toast with jelly, a banana and sometimes a bowl of Honey Nut Cheerios for a cup of plain yogurt, blueberries and an English muffin without jelly. Edgell, 56, dropped 10 pounds in two weeks, and by mid-October weighed the same as he did in college: less than 200 pounds. His blood glucose levels are much improved. “I was ignorant about food and nutrition,” Edgell says.


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