DONALD MARRON
Donald Marron is the Director of Economic Policy Initiatives and an Institute Fellow at the Urban Institute in Washington, D.C. He served in a number of senior posts in the White House and Congress from 2002 to 2009, including as a member of the President’s Council of Economic Advisers (CEA), as acting director of the Congressional Budget Office (CBO), and as executive director of Congress’s Joint Economic Committee (JEC). The following selection originally appeared in Forbes in 2015 and summarizes the Urban Institute’s most recent findings on taxing unhealthy foods and drinks.
Should Governments Tax Unhealthy Foods and Drinks?
With obesity and diabetes at record levels, many public health experts believe governments should tax soda, sweets, junk food, and other unhealthy foods and drinks. Denmark, Finland, France, Hungary, and Mexico have such taxes. So do Berkeley, California, and the Navajo Nation. Celebrity chef Jamie Oliver is waging a high-profile campaign to get Britain to tax sugar, and the Washington Post has endorsed the same for the United States.
Do such taxes make sense? My Urban Institute colleagues Maeve Gearing and John Iselin and I explore that question in a new report, Should We Tax Unhealthy Foods and Drinks?
Many nutrients and ingredients have been suggested as possible targets for taxes, including fat, saturated fat, salt, artificial sweeteners, and caffeine. Our sense, though, is that only sugar might be a plausible candidate.
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Sugar in foods and drinks contributes to obesity, diabetes, and other conditions. By increasing the price of products that contain sugar, taxes can get people to consume less of them and thus improve nutrition and health. Health care costs would be lower, and people would live healthier, longer lives. Governments could put the resulting revenue to good use, perhaps by helping low-income families or cutting other taxes.
5 That’s the pro case for a sugar tax, and it’s a good one. But policymakers need to consider the downsides too. Taxes impose real costs on consumers who pay the tax or switch to other options that may be more expensive, less enjoyable, or less convenient.
That burden would be particularly large for lower-income families. We find that a U.S. tax on sugar-sweetened beverages would be highly regressive, imposing more than four times as much burden, relative to income, on people in the bottom fifth of the income distribution as on those in the top fifth.
Another issue is how well sugar consumption tracks potential health costs and risks. If you are trying to discourage something harmful, taxes work best when there is a tight relationship between the “dose” that gets taxed and the “response” of concern. Taxes on cigarettes and carbon are well-targeted given tight links to lung cancer and climate change, respectively. The dose-response relationship for sugar, however, varies across individuals depending on their metabolisms, lifestyle, and health. Taxes cannot capture that variation; someone facing grave risks pays the same sugar tax rate as someone facing minute ones. That limits what taxes alone can accomplish.
In addition, people may switch to foods and drinks that are also unhealthy. If governments tax only sugary soda, for example, some people will switch to juice, which sounds healthier but packs a lot of sugar. It’s vital to understand how potential taxes affect entire diets, not just consumption of targeted products.
A final concern, beyond the scope of our report, is whether taxing sugar is an appropriate role for government. Some people strongly object to an expanding “nanny state” using taxes to influence personal choices. Others view taxes as acceptable only if individual choices impose costs on others. Eating and drinking sugar causes such “externalities” when insurance spreads resulting health care costs across other people. Others go further and view taxes as an acceptable way to reduce “internalities” as well, the overlooked harms consumers impose on themselves.
10 Policymakers must weigh all those concerns when considering whether to tax sugar. If they decide to do so, they should focus on content, not proxies like drink volume or sales value. Mexico, for example, taxes sweetened drinks based on their volume, a peso per liter. That encourages consumers to reduce how much they drink but does nothing to encourage less sugary alternatives. That’s a big deal because sugar content ranges enormously. Some drinks have less than 10 grams of sugar (2 1/2 teaspoons) per serving, while others have 30 grams (7 1/2 teaspoons) or more. Far better would be a content-based tax that encourages switching from the 30-gram drinks to the 10-gram ones.
Focusing on sugar content would bring another benefit. Most sugar tax discussions focus on changing consumer choices. But consumers aren’t in this alone. Food and beverage companies and retailers determine what products they make, market, and sell. Taxing drink volumes or the sales value of sugary food gives these companies no incentive to develop and market lower-sugar alternatives. Taxing sugar content, however, would encourage them to explore all avenues for reducing the sugar in what we eat and drink.
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Marron builds his essay around the question in paragraph 2: “Do [sugary food] taxes make sense?” Do you think that Marron answers that question satisfactorily? Why, or why not?
Marron mentions early in his essay that nutrients and ingredients other than sugar — such as fat, saturated fat, artificial sweeteners, caffeine, and sodium — have been considered as targets for taxes. However, in his estimation, “only sugar might be a plausible candidate” (para. 3). What evidence do you think Marron intends to support this claim?
Marron lists the pros of a sugar tax in paragraph 4, but he then lists the cons of a sugar tax in paragraphs 5–9, going into much greater detail for every con he raises. After reading these pros and cons, toward which side of the argument do you find yourself leaning? Do you think that would still be the case if the pros and cons were given more equal weight within Marron’s essay?
What does Marron mean when he cites a sugary beverage tax as “regressive” (para. 6)?
Explain in your own words what Marron means by considering the “dose-response relationship” in relation to taxes (para. 7). Do you find the argument that sugar has a loose dose-response relationship persuasive? Why or why not?
Marron argues that it is “vital to understand how potential taxes affect entire diets” (para. 8), citing the concern that a tax on one type of sugary food or drink (such as soda) might drive people toward alternatives that are also unhealthy (such as juice). Do you think that this point bolsters or weakens the rest of Marron’s arguments about a sugar tax? How so?
In paragraph 9, Marron wonders whether it is even the government’s place to impose taxes designed to influence individual choices while noting arguments that taxes may be appropriate when individual choices impose costs on others or when they can help to reduce harm people may bring onto themselves without realizing it. As a taxpayer, where do you stand on the notion of using taxes to influence individual behavior? What possible pros and cons exist to such an approach?
Throughout his essay, Marron refers to “policymakers” who must consider the questions he raises in determining whether or not to tax sugary foods and drinks. If you were a policymaker, which question or set of questions would be most important to you, and why?
In 2016, Philadelphia Mayor Jim Kenney proposed a sugary drink tax in the city that would add three cents per ounce to artificially sweetened beverages — or thirty-six cents per 12-ounce drink. Citing the soda industry’s tendency to market to low-income people, Kenney said, “What we’re looking to do is take some of [their] profit, to put it back into the neighborhoods that have been their biggest customers.” Tax revenues would be used to fund pre-kindergarten education and improve city parks and recreational facilities. Is this a good or bad idea? What questions or concerns would a policymaker responsibly raise as a counterargument to the proposed measure?