Sugary drink tax models show health gains, cost reductions

Research published in the American Heart Association’s journal Circulation has used a simulation model of different designs of taxes on sugary drinks, which suggests that all tax designs would generate substantial health gains and lower health costs in the US. However, some of the models performed better than others.

Frequent consumption of sugary drinks is linked to weight gain, Type 2 diabetes and cardiovascular disease. Sugary drinks remain the largest source of added sugars intake in the US, with approximately 60% of children and half of adults consuming sugary drinks every day.

Researchers created a nationally representative microsimulation model to test three types of taxation on sugary drinks:

• A flat ‘volume tax’ by drink volume ($0.01 per ounce), the only type used in US cities to date.
• A ‘tiered sugar content tax’ by three levels of sugar content (ranging from $0.00 for less than five grams of added sugars per eight ounces to $0.02 per ounce of added sugars for more than 20 grams of added sugars per eight ounces).
• A ‘fixed sugar content tax’ by absolute sugar content ($0.01 per teaspoon of added sugars, regardless of the number of ounces).

Under the simulation scenario, researchers found all three tax structures would generate tax revenue, lower healthcare costs and prevent cardiovascular disease events and diabetes causes. However, the tiered tax and sugar content tax could generate the largest health gains and cost savings. Any of the tax designs could be effective public health policy tools that may be able to reduce consumption of sugary drinks, and thus improve health and overall wellbeing.

Younger adults (aged between 35 and 44 years), Blacks, Hispanics and adults with lower incomes were estimated to experience the largest health gains. Thus, the research suggested that all three sugary drink tax designs may reduce health disparities, particularly amount these subgroups.

“Overwhelming evidence confirms that food prices have a big impact on purchasing decisions. Taxing sugary drinks influences consumer choices, reducing consumption,” said Yujin Lee, PhD, co-lead study author. “US cities have introduced volume taxes on sugary drinks. But our findings suggest that a tiered fixed sugar content tax would be best, reducing consumer intakes while also encouraging manufacturer reformulations to reduce the sugar content of their products.”

Researchers estimated the potential health impact, quality-adjusted life-years (a measure of disease burden) costs and cost-effectiveness of volume-based and sugar content-based (tiered, fixed) sugary drink taxes in the US. Researchers used nationally representative data and a validated computer simulation model that incorporated data on adults aged 35 to 80 across three National Health and Nutrition Examination Survey cycles (2009 to 2014) to derive sociodemographics, cardiometabolic risk factors and lifestyle habits.

Net costs were calculated from adding the expense of the government’s implementation of tax collection plus the industry’s compliance and reformulation costs, then subtracting healthcare savings from fewer medical screenings, treatments, medications, surgeries and supplies, discounted at 3% annually. Seven cities in the US (Philadelphia, Seattle, Boulder, Berkeley, Albany, Oakland and San Francisco) currently have volume-based taxes for sugary drinks, along with Mexico, Belgium, Brunei, Norway and the Philippines. The American Heart Association advocates for a tiered sugar content tax as an effective approach to achieve better health and expand healthier options.

The association has also supported volume-based sugar taxes, which were tabled to be passed in those seven cities. Taxing sugary drinks based on sugar content (a tiered or fixed tax) has been implemented in other countries, including Chile, Ireland, the United Kingdom, France, Portugal and South Africa. The simulation found that, compared to the status quo, over a lifetime, a volume-based tax could prevent 850,000 cardiovascular (CVD) deaths and prevent 269,000 cases of diabetes. The volume-based tax would also gain 2.44 million quality-adjusted life years across the population, generate $80.4 billion (AU$116.1 billion) in federal tax revenue, and save $53.2 billion (AU$76.8 billion) in net healthcare costs.

However, the tiered- and absolute-sugar content tax structures could double those gains. A tiered model tax would prevent 1.67 million CVD deaths and 531,000 diabetes cases, while generating $142 billion (AU$205 billion) in tax revenue. It would also gain 4.85 million quality-adjusted life years across the population and save $105 billion (AU$151.6 billion) in net healthcare costs.

The simulation estimated that an absolute content tax would prevent 1.8 billion CVD deaths and 550,000 diabetes cases, while generating about $42 billion (AU$60.69 billion) in tax revenue. It would also gain five billion quality-adjusted life years across the population and save $105 billion (AU$151.7 billion) in net healthcare costs.

For the study, researchers defined sugary drinks as soft drinks/sodas, juice drinks, sports drinks, pre-sweetened iced tea or coffee, and electrolyte replacement drinks with five or more grams of added sugars per 12 ounces. Consumption of sugary drinks, including their added sugar content for each person, was derived from two, 24-hour dietary recalls per person.

As the projections and modelling are based on observational data, the study does not establish a causal link between the health and cost effects of these sugary drink tax designs in US adults. Rather, the estimates provide evidence that can be considered and incorporated into the design, implementation and evaluation plans of potential taxes, including at local, state or federal levels. The model’s population also did not include children, adolescents or adults under age 35.

“Our study underscores the importance of considering different sugary drink tax designs in any new local, state and federal efforts to improve health outcomes and save health care costs,” Lee said.

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