Potential Impact
of Sugar-Sweetened
and Other Beverage
Excise Taxes in Illinois
Estimating the
October 2011
Frank J. Chaloupka
Y. Claire Wang
Lisa M. Powell
Tatiana Andreyeva
Jamie F. Chriqui
Leah M. Rimkus
October 2011
Frank J. Chaloupka 1
Y. Claire Wang 2
Lisa M. Powell 1
Tatiana Andreyeva 3
Jamie F. Chriqui 1
Leah M. Rimkus 1
1 Health Policy Center, Institute for Health Research and Policy, University of Illinois at Chicago.
2 Department of Health Policy & Management, Mailman School of Public Health, Columbia University
3 Rudd Center for Food Policy & Obesity, Yale University.
Executive Summary
Over the past few decades, obesity rates in the United States have risen rapidly, with
recent estimates indicating that more than one-third of adults are obese, up from less
than one in seven in the early 1960s, with another one-third overweight. Recent estimates
for children and adolescents show that more than one in six is obese, more than triple the
rate of the early 1970s. Illinois is experiencing the same rise in obesity. Between 1995 and
2009, the prevalence of obesity among Illinois adults rose by nearly 65 percent, from 16.7
percent to 27.4 percent, with another 37.1 percent overweight in 2009. Similarly, more
than one in five Illinois youth ages 10 through 17 were obese in 2007, and more than one
in three were overweight or obese.
The sharp rise in obesity has resulted from a change in the ‘energy balance’ – more calories being
taken in than expended. Many factors have contributed to this imbalance, from increased caloric intake
following reductions in the prices of energy dense foods and beverages to fewer calories expended as
technological changes reduced physical activity. Among these, the parallel rise in calories consumed
from sugar sweetened beverages (SSBs) has drawn particular attention. SSBs include carbonated soft
drinks, sports drinks, fruit drinks, flavored waters, sweetened teas, ready-to-drink coffees, and other
non-alcoholic drinks containing added sugars. One recent study concludes that SSBs account for at least
twenty percent of the increases in weight in the United States from 1977 through 2007.
The increasing recognition of the role of SSBs in contributing to the growing obesity epidemic has spurred
interest in policy and other interventions that aim to reduce SSB consumption. Given the demonstrated
effectiveness of increased tobacco taxes in reducing cigarette smoking and other tobacco product use,
many have proposed SSB taxes that would lead to sizable increases in prices as a promising policy
option for curbing obesity and its health and economic consequences. To date, however, existing taxes
are mostly small sales taxes that are applied to both sugar-sweetened and diet beverages. In Illinois,
the state’s 6.25 percent sales tax is applied to many beverages, including: regular and diet sodas;
juice drinks containing 50 percent or less real juice; sweetened, ready-to-drink teas; and sports drinks
and other isotonic beverages. Research assessing the impact of the small taxes applied in many states
generally finds that they have modest effects on beverage consumption and a limited impact on weight.
At the same time, estimates from these studies suggest that sizable taxes that result in large price
increases would, by sharply reducing SSB consumption, have a substantial impact on the prevalence
of obesity at the population level.
This report was made possible by funding through the Department of Health and Human Services:
Communities Putting Prevention to Work (CPPW) grant. CPPW is a joint project of the
Cook County Department of Public Health and the Public Health Institute of Metropolitan Chicago.
1
Given the potential for SSB taxes to reduce obesity, we use the best available data and research-based
evidence to estimate the impact of alternative beverage taxes in Illinois. Specifically, we consider
four alternative beverage taxes – a one cent per ounce excise tax on SSBs and their diet versions
(‘all beverages’); a one cent per ounce excise tax on SSBs only; a two cent per ounce excise tax on all
beverages; and a two cent per ounce excise tax on SSBs only. Using recent data, we predict their impact
on overall beverage consumption, tax revenues, age and gender-specific frequency of SSB consumption,
average daily caloric intake, body weight, body mass index (BMI), obesity prevalence, diabetes
incidence, and health care costs of diabetes and obesity. The table below summarizes our estimates.
Table 1
Estimated Impact of Alternative Beverage Excise Taxes, Illinois, 2011
Reduction
in Health
Care Costs
of Diabetes
Reduction
in Number
of Obese
Youth (2-17)
Reduction
in Number
of Obese
Adults (18+)
Reduction
in Number
of Obese
Illinoisans
Reduction
in Diabetes
Incidence
1 Cent - All
6.2%
3.5%
123,418
2,294
$13.8
$100.5
$876.1
1 Cent SSBs Only
9.3%
5.2%
185,127
3,442
$20.7
$150.8
$606.7
2 Cents - All
12.3%
7.0%
246,836
4,591
$27.6
$201.0
$1,419.6
2 Cents SSBs Only
18.5%
10.5%
370,253
6,885
$41.3
$301.6
$839.3
(millions)
Reduction New Tax
in Obesity- Revenues
Related
(millions)
Health Care
Costs (millions)
In 2011, we estimate that Illinoisans will consume more than 620 million gallons of SSBs, and almost
200 million gallons of diet alternatives. We estimate that a one-cent per ounce tax on SSBs only would
lead to about a 23.5 percent drop in SSB consumption, while generating more than$600 million in new
revenues. A higher tax would lead to even larger declines in consumption and increases in revenues; a
broader based tax on all beverages would have a smaller impact on SSB consumption while generating
more revenue.
Similarly, the reductions in SSB consumption that would result from a tax on SSBs will lead to reductions
in weight. Using the relatively conservative assumption that half of the reduction in caloric intake from
SSBs following an SSB tax is offset by increases in caloric intake from other sources, we estimate that a
one-cent per ounce tax on SSBs only will reduce average weight among Illinoisans by about 1.7 pounds,
with larger reductions in the younger and male populations that are heavier consumers. We estimate that
these reductions in weight will lead to reductions in the prevalence of obesity in Illinois. For example, we
estimate that a one-cent per ounce tax on SSBs only will reduce obesity prevalence among Illinoisans
two years and older from 25.2 percent to 23.7 percent – a drop of over 185,000 in the number of obese
persons in the state. Almost one-quarter of the drop – more than 45,000 – would be among children
ages 2 through 17 years. Again, a higher tax on SSBs would lead to a larger decline in weight and
obesity, while a broader based tax on all beverages would have a smaller impact.
Additionally, given the significant costs of treating the diseases caused by obesity, we estimate that the
reductions in the number of obese Illinoisans following a tax on SSBs would lead to reduced health care
spending in the state. For example, we estimate that a one-cent per ounce tax on SSBs only would reduce
obesity-related health care costs by more than $150 million in the first year. Given that a sizable share
of the obesity-related health care costs in Illinois are paid for by publicly funded insurance programs, an
SSB tax will not only raise new revenues for the state, but it also will reduce state Medicaid spending.
Given the continued reduction in SSB consumption following the alternative beverage taxes, the impact of
the tax will grow over time as additional new diabetes cases will be prevented and as the long term costs
resulting from childhood obesity are averted. To the extent that a portion of the new revenues generated
by the tax are used to support obesity prevention and reduction programs in Illinois, the future declines in
obesity prevalence and the resulting disease and costs will be even larger.
In summary, sizable new SSB taxes would be a win-win for Illinois – they would generate considerable
new revenues, and lead to reductions in SSB consumption, obesity, and the resulting disease burden
and health care costs. As seen with tobacco tax increases that earmarked a portion of new revenues
for comprehensive tobacco prevention and cessation programs that further reduced tobacco use and
its consequences, using the same approach with SSB tax revenues would lead to further reductions in
obesity while at the same time increasing public support for such taxes.
The increased prices that result from SSB taxes will reduce SSB consumption and its consequences.
Given the research demonstrating that increased SSB consumption leads to an increased risk of type 2
diabetes, we estimate the impact of alternative beverage taxes on the incidence of diabetes and related
costs. For example, we estimate that a one-cent per ounce tax on SSBs only would prevent nearly 3,500
new cases of type 2 diabetes in 2011, reducing health care costs by more than $20 million. Higher taxes
would lead to larger reductions in the incidence of type 2 diabetes and the resulting costs of treating it,
while a broader based tax would have a smaller impact.
2
3
Section I
Introduction
U.S. obesity rates have risen rapidly over the past several decades. By 2007-08, more
than one-third of adults 20 and older were obese (body mass index (BMI) ≥ 30),
compared with fewer than one in seven in 1960-62; an additional one-third of adults
were overweight (BMI ≥25) (Flegal, et al., 2010; National Center for Health Statistics
(NCHS), 2008). Among children and adolescents ages 2-19, more than one in six were
obese (≥ 95th percentile) in 2007-08, more than triple the five percent obesity rate in
the early 1970s (Ogden and Carroll, 2010).
There are considerable disparities in the prevalence of obesity, with rates varying by gender, race/
ethnicity, and socio-economic status. In 2009 in Illinois, for example, 72.6 percent of adult men were
either overweight or obese (44.0 and 28.6 percent, respectively), while 56.5 percent of women were
overweight or obese (26.2 percent and 30.4 percent, respectively). Similarly, 14.7 percent of high school
boys in Illinois were obese in 2009, compared to 9.0 percent of high school girls. Obesity prevalence
among Illinois adults generally rises from adolescence and young adulthood through middle age, before
declining among older adults (see Figure 2). Racial/ethnic differences are similarly large, with the highest
obesity prevalence among youth and adult Blacks and the lowest among non-Hispanic Whites (see Figure
3). Finally, there are striking differences in obesity prevalence across different socioeconomic groups,
with considerably lower rates among the most educated and highest income Illinoisans than among their
less educated and lower income counterparts (see Figure 4).
Figure 2
Prevalence of Obesity by Age, Illinois, 2009
Illinois has experienced the same upward trend in obesity rates. From 1995 through 2009, the
prevalence of obesity among adults in Illinois rose by nearly 65 percent, from 16.7 percent in 1995 to
27.4 percent in 2009 (see Figure 1). An additional 37.1 percent of Illinois adults were overweight in
2009. Among youth ages 10-17 in 2007, more than one in five (20.8 percent) were obese while more
than one in three (34.9 percent) were overweight or obese (≥ 85th percentile) (Singh, et al., 2010).
Note: 12-17 year old rate reflects prevalence among high school students.
Sources: Youth Risk Behavior Surveillance System, http://apps.nccd.cdc.gov/youthonline/App/
Default.aspx, and Behavioral Risk Factor Surveillance System, http://apps.nccd.cdc.gov/brfss/
36.2
Figure 1
35
Prevalence of Obesity in Adults, Illinois 1995-2009
31.3
Source: Behavioral Risk Factor Surveillance System,
http://apps.nccd.cdc.gov/brfss/
30
27.4
20
24.7
25
Percent Obese
25
Percent Obese
30.5
24.7
20
14.8
15
11.9
16.7
10
15
5
10
0
12 -17
18 -24
25 -34
35 -44
45 -54
55 -64
65+
5
0
4
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
5
Figure 3
Figure 5
Prevalence of Obesity by Race/Ethnicity, Illinois, 2009
Soda Consumption and Adult Obesity Prevalence, California Counties, 2005
Note: Youth rates reflect prevalence among high school students.
Youth
Adults
40
65
Percent of Adults Who Are
Overweight of Obese
36.5
35
30
30
Percent Obese
Source: Babey, et al.,
2009 and authors’
calculations.
70
Sources: Youth Risk Behavior Surveillance System, http://apps.nccd.cdc.gov/youthonline/App/Default.
aspx, and Behavioral Risk Factor Surveillance System, http://apps.nccd.cdc.gov/brfss/
26.5
25
18.4
20
15
12.9
9.8
10
60
55
50
5
0
45
White
Black
Hispanic
y = 16.44ln(x) + 6.1142
R² = 0.6656
40
Figure 4
10
Prevalence of Obesity by Education and Income, Adults, Illinois, 2009
40
Percent Obese
35
30
25
20
15
10
5
l
oo
gh
i
<H
h
Sc
gh
Hi
l
oo
h
Sc
ED
me
So
l
oo
G
or
igh
Po
H
st-
h
Sc
C
ol
e
leg
a
Gr
tes
a
du
<
0
,00
5
$1
9
,99
4
-$2
0
,00
5
$1
9
0
,00
5
$2
9
,99
,99
4
-$3
0
,00
5
$3
9
-$4
$
+
00
,0
50
The public health and economic consequences of the rise in obesity are enormous. Obesity increases the
risks of coronary heart disease, hypertension, stroke, type 2 diabetes, various cancers, osteoarthritis,
sleep apnea, other respiratory problems, and other health ailments (National Heart, Lung and Blood
Institute (NHLBI), 1998). In 2008, the nation spent as much as $147 billion to treat the consequences
of obesity – nearly ten percent of overall health care spending, and with about a half of costs paid by
Medicaid and Medicare (Finkelstein, et al., 2009). In the state of Illinois, obesity-attributable health care
costs were almost $4.4 billion per year with Medicaid and Medicare funds covering about 54 percent of
the burden (Finkelstein, et al., 2004).
6
20
25
30
35
40
% Adults Drinking One or More Sodas per Day
Source: Behavioral Risk Factor Surveillance System, http://apps.nccd.cdc.gov/brfss/
0
15
The sharp rise in obesity has resulted from a change in the ‘energy balance’ – more calories being
taken in than expended. Many factors have contributed to this imbalance, from increased caloric intake
following reductions in the prices of energy dense foods and beverages to fewer calories expended as
technological changes reduced physical activity (Lakdawalla and Philipson, 2009). Among these, the
parallel rise in calories consumed from SSBs has drawn particular attention. SSBs include carbonated
soft drinks, sports drinks, fruit drinks, flavored waters, sweetened teas, ready-to-drink coffees, and other
non-alcoholic drinks containing added sugars. Nielsen and Popkin (2004) found that caloric intake from
SSBs accounted for 3.9 percent of total intake in 1977-78, increasing to 9.2 percent by 1999-2001
– a rise of more than 120 calories per day. Similarly, cross-sectional comparisons for California adults
(see Figure 5; comparable data not available for Illinois) suggest that SSB consumption is positively
associated with the prevalence of obesity. Recent evidence on the metabolism of “liquid calories”
suggests that caloric consumption from beverages does not lead to offsetting reductions in reduced
caloric intake from food, providing additional evidence on the link between higher SSB consumption and
increased obesity (Popkin and Duffey, 2010). One recent study concludes that SSBs account for at least
20 percent of the increases in weight in the United States from 1977 through 2007 (Woodward-Lopez,
et al., 2011).
The simple associations observed in the trend and cross-sectional data are confirmed by epidemiologic
and experimental analyses. While there is considerable variation in study designs and estimated effects
sizes, recent comprehensive reviews by Malik and colleagues (2006) and Vartanian and colleagues
(2007) conclude that, based on evidence from a number of cross-sectional studies, increased SSB
consumption is associated with higher caloric intake, poorer diet quality, and increased likelihood of
obesity. Both reviews conclude that increased SSB consumption results in weight gain among children
and adults based on evidence from longitudinal and experimental studies.
7
Both Vartanian and colleagues (2007) and Gortmaker and colleagues (2009) note that studies funded
by the food and beverage industry are more likely to find smaller or less consistent associations between
SSB consumption and weight. In addition, SSB consumption is linked to numerous adverse health and
nutrition consequences. Vartanian and colleagues’ (2007) review highlights the negative impact of
SSB consumption on calcium intake – largely from lower milk consumption among those consuming
more SSBs – and on other nutrient intake (including fiber, protein, and riboflavin), as well as various
health outcomes. Similarly, Gortmaker and colleagues (2009) summarize the evidence relating
SSB consumption to type 2 diabetes, lower bone density, dental problems, headaches, anxiety, and
sleep loss.
SSB consumption and its contribution to caloric intake are most pronounced among young people
(see Figure 6). Using data from the 1999-2004 National Health and Nutrition Examination Survey
(NHANES), Wang and colleagues (2008) estimated that youth ages 12-19 consumed about 16 percent
of total caloric intake – or 356 calories per day – from SSBs; among children ages 2-5 and 6-11, SSB
consumption accounted for about 11 percent of intake (176 and 229 calories per day, respectively).
Using the same data, Bleich and colleagues (2009) estimated that SSBs accounted for about 12 percent
of total caloric intake among 20-44 year olds (289 calories per day), before falling to 6 percent and
5 percent among those 45-64 and 65 and older, respectively. Rates of SSB consumption rise from
70 percent among 2-5 year olds in 1999-2004, peaking at 84 percent for ages 12-19, falling to
72 percent for 20-44 year olds, and decline among older ages (Wang, et al., 2008; Bleich, et al., 2009).
Numerous studies demonstrate the persistence of body weight over the life cycle, showing that obese
children are likely to become obese adults (McTigue, et al., 2002). Contributions of SSB consumption to
high rates of obesity among children and adolescents will most likely lead to greater prevalence of adult
obesity in the future. The habitual nature of SSB consumption is also well known, suggesting that higher
caloric intake from SSBs among younger populations can persist into adulthood, further increasing the
risk for obesity (Popkin and Duffey, 2010). Obesity among adolescents and young adults is of particular
concern given its links to severe obesity at older ages. For example, using National Longitudinal Study
of Adolescent Health data, The and colleagues (2010) found that obese youth at baseline (ages 12-21)
were significantly more likely to be severely obese twelve years later.
Figure 6
Per Capita Daily Consumption of Calories from SSBs, by Type, 1999-2004
Source: Adapted from Wang, et al. (2008) and Bleich, et al., (2009).
350
300
kcal
250
200
150
Other
100
Sport Drinks
50
Fruit Punch
0
8
Taxation as
Public Health Policy
Section II
Increased awareness of the obesity epidemic and its health and economic consequences
has spurred policy makers, public health practitioners, advocates, and others to look for
interventions to promote healthier eating and increased physical activity (Institute of
Medicine (IOM), 2005). Some of the proposed policy solutions have explicitly targeted
SSB consumption by limiting access to SSBs in public facilities (schools, government
worksites, and recreation centers); increasing access to drinking water and encouraging
water as an alternative to SSBs; restricting marketing of SSBs to children; and adopting
policies that alter relative prices of SSBs and healthier alternatives (Centers for Disease
Control and Prevention (CDC), 2009; IOM, 2009). These strategies have, at least in
part, been identified as having potential to curb obesity based on successful experiences
with similar approaches to reducing other unhealthy behaviors, notably tobacco use and
harmful drinking.
In The Wealth of Nations, Adam Smith (1776) wrote “Sugar, rum, and tobacco are commodities which
are nowhere necessaries of life, which are become objects of almost universal consumption, and which
are therefore extremely proper subjects of taxation.” Since Smith focused on the revenue generating
potential of these taxes, nearly every government worldwide has taxed tobacco products and alcoholic
beverages to raise revenues. In recent years, the beneficial public health impact of tobacco and alcohol
taxes has become clear as extensive research has demonstrated the effectiveness of higher taxes in
reducing tobacco and alcohol use and their consequences (International Agency for Research on Cancer
(IARC), in press; Wagenaar, et al., 2009, 2010). Reduced use is a result of preventing uptake in youth,
promoting cessation among current users or reducing their frequency and intensity of consumption, and
deterring relapse among former users (IARC, in press; Wagenaar, et al., 2009). This improves public
health by reducing the disease burden of tobacco and alcohol use, and lowering accidents, violence, and
other consequences of harmful drinking (IARC, in press; Wagenaar,
et al., 2010).
In the United States, evidence on the effectiveness of higher taxes in reducing tobacco use and its
consequences has led to sharp increases in tobacco taxes and prices. This significantly reduced tobacco
use among youth and adults, while generating considerable new revenues that some states have used
to support other prevention and cessation activities, leading to reductions in tobacco use beyond those
that result from the tax increase alone (Chaloupka, 2010) (see Figure 7 for trends in cigarette taxes
and cigarette sales). In contrast, despite similarly strong evidence on the impact of higher alcohol taxes
and prices, the real value of alcohol taxes has been eroded over time by inflation, contributing to falling
alcohol prices and higher rates of drinking and its consequences than would exist had these taxes kept
pace with inflation over time (Xu and Chaloupka, in press) (see Figure 8 for trends in beer taxes and
beer sales).
Soda
Age 2-5
Age 6-11
Age 12-19
Age 20-44
Age 45-65
Age 65+
9
Figure 7
In Illinois, the 6.25 percent state sales tax is applied to many beverages, including: regular and diet
carbonated soft drinks; juice drinks containing 50 percent or less juice; sweetened, ready-to-drink teas;
and sports drinks and other isotonic beverages. This is more than two percentage points higher than the
average sales tax applied to these beverages across all states. Juice drinks containing more than 50
percent juice, bottled waters, and other beverages are subject to the 1.00 percent sales tax that applies
to most foods and beverages.
Cigarette Taxes and Cigarette Sales, US, 1973-2010
Source:
Orzechowski and
Walker (2011)
and authors’
calculations.
Cigarette Sales
Cigarette Tax
28.5
$2.05
26.5
$1.85
$1.65
24.5
$1.45
22.5
$1.25
20.5
$1.05
18.5
Tax Per Pack
(Feb 2011 Dollars)
Billion Packs
$2.25
The success with significant tobacco excise tax increases in reducing tobacco use and health
consequences has led to calls for sizable new taxes on SSBs (e.g. Brownell and Frieden, 2009). Many
state and local governments have debated such taxes in recent years, with proposed taxes varying
widely. Some proposals call for significantly higher sales taxes on SSBs than those that already exist,
while others propose ad valorem (value-based) or specific (volume or weight-based) excise taxes (see
Figure 10 for states with recent legislative proposals for SSB taxes).
Figure 9
$0.85
16.5
$0.65
14.5
$0.45
1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Sales Tax Rates on Carbonated Beverages, July 1, 2010
MT
ME
ND
VT
MN
OR
ID
SD
NY
WI
Figure 8
UT
Beer Taxes and Beer Sales, US, 1973-2009
IL
CO
KS
CA
AZ
NM
KY
205.0
$1.15
195.0
$1.05
185.0
$0.95
175.0
$0.85
165.0
$0.75
155.0
$0.65
145.0
$0.55
> 1 to < 3% (n=5 States)
FL
0% (n=16 States Plus DC)
AK
HI
Figure 10
Legislative Proposals for SSB Taxes, March 2011
WA
ME
ND
VT
MN
OR
ID
SD
NY
WI
$0.45
UT
CO
CA
Governments have yet to heed Smith’s call for sugar taxes, with some taking the opposite approach
and subsidizing sugar and other high calorie sweeteners. In the United States, SSB taxation is largely
limited to subjecting SSBs and other select beverages to sales taxes that add a few percent to prices
(in contrast to cigarette taxes which account for nearly half of cigarette prices), and a few states adopting
small excise taxes or fees on carbonated and other beverages (Chriqui, et al., 2008; Bridging the Gap
Research Program, 2010) (see Figure 9).
AZ
IL
KS
NM
WV
VA
KY
NC
TN
AR
AL
NJ
DE
CT
Source: Yale University, Rudd Center
for Food Policy & Obesity (2011);
http://www.yaleruddcenter.org/what_
we_do.aspx?id=272
Map Legend
Excise Tax
Sales Tax
SC
MS
TX
MD
OH
IN
MO
OK
RI
PA
IA
NE
NV
NH
MA
MI
WY
1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
> 3 to < 5% (n=5 States)
LA
TX
MT
135.0
> 5% to < 7% (n=19 States)
SC
GA
AL
Map Legend
> 7% (n=5 States)
NC
AR
MS
$1.25
CT
DE
VA
TN
Beer Tax
215.0
WV
Tax Per 6-Pack
(Feb 2011 Dollars)
Million Barrels
Beer Sales
IN
NJ
MD
OH
MO
OK
RI
PA
IA
NE
NV
NH
MA
MI
WY
Source: Brewers’
Almanac, 2010, and
authors’ calculations.
Source: Bridging the Gap Research
Program, University of Illinois at Chicago;
http://www.bridgingthegapresearch.org
WA
GA
Excise and Sales
LA
FL
AK
HI
10
11
Figure 11
Experiences with excise and other taxes on tobacco products provide some insights concerning
alternative types of SSB taxes. As described by the World Health Organization (WHO, 2010) in its
Technical Manual for Tobacco Tax Administration, uniform specific taxes on all tobacco products
will have the greatest public health impact, while also generating significant tax revenues that are
relatively stable over time. A uniform specific excise tax sends the message that all tobacco products
are equally harmful, in contrast to tiered-specific or ad valorem taxes which apply different taxes
to similar products based on their characteristics (e.g., cigarette length or presence/absence of a
filter) or prices. Moreover, a uniform specific excise tax minimizes the price gap between higher and
lower-priced products, reducing opportunities for consumers to avoid at least some of the tax by
substituting to cheaper products.
Given the parallel trends in SSB consumption and obesity, a growing number of researchers
have recently assessed the impact of beverage taxes and prices on beverage consumption. This
research clearly demonstrates that higher beverage prices significantly reduce consumption, with
one recent comprehensive review concluding that a 10 percent price increase could reduce soft
drink consumption by about eight percent (Andreyeva, et al., 2010). Estimates from studies that
have focused on the demand for SSBs find even larger reductions in consumption for a 10 percent
price increase. Lin and colleagues (2010) estimate that a ten percent increase in SSB prices would
reduce consumption by 9.5 to 12.6 percent.
Less clear is the impact of SSB taxes on weight outcomes. Existing research finds little or no
impact of existing low taxes on BMI or obesity rates, noting that this is likely due to the low current
tax rates and that the point estimates imply that sizable taxes would significantly reduce obesity
in at least some populations (Finkelstein, et al., 2010; Sturm, et al., 2010; Powell et al., 2009).
Others conclude that even large SSB taxes would have little impact on weight outcomes suggesting
that reductions in caloric intake from SSBs would be largely offset by increased calories from other
beverages such as whole milk (Fletcher, et al., 2010). Still others find only partial substitution in
response to changes in relative prices of SSBs and other beverages, concluding that sizable SSB
taxes could significantly reduce net caloric intake, body weight, and obesity among children and
adults (Smith, et al., 2010). Further, these studies find that price responsiveness is greater
among young people, those on lower incomes, and those already at higher weight (Powell and
Chriqui, in press).
12
Sources: Bureau of Labor Statistics, Youth Risk Behavior Surveillance System
on-line, and authors’ calculations.
Carb. Bev.
155
% Obese, Youth
12.9
Inflation Adjusted Carbonated
Beverage Price Index
153
12.4
151
11.9
149
11.4
147
10.9
145
143
Percent Obese
With respect to SSB taxes, a uniform specific tax based on volume (e.g., per ounce) or sugar-content
(e.g., per gram of added sugar) should have a greater impact on consumption than a comparable
ad valorem excise tax or a sales tax, given the potential for consumers to purchase larger volumes
that are less expensive per ounce (e.g., a two-liter bottle rather than a 12-ounce can) or cheaper
brands in response to the price increases resulting from the tax (Chriqui, et al., in progress; Powell
and Chriqui, in press). Likewise, specific excise taxes are easier administratively and reduce
opportunities for tax avoidance and evasion as they do not require valuation of a product. The main
disadvantage of a specific excise tax is that it needs to be regularly adjusted for inflation over time
in order to maintain its public health and revenue impact. Finally, excise taxes are likely to have a
greater impact on consumption than sales taxes given that excise taxes are reflected in the shelfprices of SSBs while sales taxes are imposed at the checkout after purchase decisions have largely
been made (Chriqui, et al., in progress; Powell and Chriqui, in press).
Carbonated Soft Drink Prices and Prevalence of Obesity among Youth, 1999-2009
1998
2000
2002
2004
2006
2008
10.4
Despite this mixed evidence that likely reflects very low existing taxes on SSBs, the weight of the evidence
suggests that taxes on the order of a cent or two per ounce will raise prices enough to reduce net caloric
intake and obesity. Indeed, recent increases in SSB prices have been accompanied by reductions in
obesity prevalence among adolescents although other factors are also likely contributing to the decline
(see Figure 11). More research is needed to understand the impact of large changes in relative prices of
SSBs on weight outcomes. At the very least, such taxes would have little impact on overall caloric intake,
while promoting substitution of healthier beverages for the empty calories contained in SSBs, reducing
some of the health consequences associated with SSB consumption.
Significant SSB taxes can generate substantial new revenues; one recent estimate suggests that a
national penny per ounce SSB tax could raise nearly $15 billion in the first year (Brownell, et al., 2009).
These revenues could support other costly components of a comprehensive obesity prevention strategy,
including mass-media public education campaigns, subsidies that lower the relative prices of healthier
foods and beverages, and programs to make safe, free drinking water more widely available. As seen
with tobacco tax increases that earmark revenues for tobacco control efforts, there is considerable public
support for SSB taxes when the revenues generated are used to support activities to reduce obesity
among children and adults (Yale Rudd Center, 2009).
13
Potential Impact
of Sugar-Sweetened
and Other Beverage
Excise Taxes in Illinois
Section III
We estimate the potential impact of an excise tax on SSBs in Illinois drawing from
the presented science on the impact of SSB consumption on weight outcomes and the
effects of beverage prices on beverage consumption, as well as published research on
the impact of SSB consumption on diabetes risk, and recent national and state-level
data on beverage consumption, prices, obesity prevalence, diabetes incidence, and health
care costs of diabetes and obesity. Figure 12 illustrates the analytic framework of
our estimation.
Figure 12
Analytic Framework
Excise Tax on SSB
Net Increase
Tax Revenue
Increase in Price
Specifically, we estimate the impact of four alternative excise taxes: a one-cent per ounce excise tax
on SSBs only; a one-cent per ounce excise tax on SSBs and their diet/low-calorie versions (i.e., all
beverages); a two-cent per ounce excise tax on SSBs only; and a two-cent per ounce excise tax on
all beverages. The outcomes assessed are beverage consumption; tax revenues; frequency of SSB
consumption; diabetes incidence; health care costs of diabetes; obesity prevalence; and obesity-related
health care costs.
Impact on Price
Recent studies estimate that the average price for carbonated soft drinks (CSDs) in the United States is
about 4.5 cents per ounce (Andreyeva, et al., in press; Hahn 2009). Based on an assessment of prices
from a variety of vendors, Andreyeva and colleagues (in press) estimated that the average prices per
ounce of other beverages are: 7 cents for fruit drinks; 5 cents for sports drinks, 9 cents for ready-to-drink
(RTD) teas; 5.5 cents for flavored waters; 17.5 cents for energy drinks; and 20 cents for RTD coffees.
Based on market shares of different beverages, the weighted average price for all beverages in 2010 is
5.3 cents per ounce. Future prices, exclusive of taxes, are assumed to rise with the average rate of CSD
inflation over the period from 1978 through 2010 (Andreyeva, et al., in press), producing an estimated
average price of all beverages in 2011 of 5.45 cents per ounce. Given this, a one-cent per ounce tax will
result in about an average 18.3 percent increase in price, if fully passed on to consumers. Similarly, a
two-cent per ounce tax will result in about an average 36.7 percent increase in price, if fully passed on
to consumers.
At least one study suggests that beverage sales taxes lead to larger increases in prices than accounted
for by the tax alone, with prices rising by about 129 percent of the amount of the tax (Besley and
Rosen, 1999). However, in order to produce conservative estimates of the impact of the tax on obesity,
diabetes, and related health care costs, we assume that the tax results in a comparable increase in the
retail prices of the taxed beverages. A greater pass through of the tax to price would result in greater
reductions in SSB consumption, obesity, and related consequences/costs, but somewhat lower tax
revenues. A less than full pass through of the tax to price (partial absorbing of the tax by beverage
companies, distributors, and/or retailers) would lead to smaller reductions in beverage consumption,
obesity, and related public health consequences and economic costs, but somewhat higher tax revenues.
When modeling the impact of a SSB-only tax, we assume that the prices of diet beverages do not change
following the imposition of the tax. In practice, however, the beverage industry may spread the tax across
all beverages, but modeling such strategic behavior is beyond the scope of our paper.
Reduced SSB
Consumption
14
Lower Incident
Type 2 Diabetes
Lower Daily
Caloric Intake
Lower Medical Cost
Lower Obesity
15
Figure 13
Impact on Overall Consumption
Illinois-specific data on beverage consumption are not available; however, comparable data are available
nationally and regionally and we use these to estimate consumption levels in Illinois, using the approach
described by Andreyeva and colleagues (in press). Specifically, we used 2008 regional sales volume
data for the consumption of carbonated soft drinks (CSDs), fruit beverages and ready-to-drink (RTD) teas
from the Beverage Marketing Corporation (2009a,b,c) and 2008 national sales volume data for sports
drinks, flavored/enhanced waters, energy drinks, and RTD coffees from the Beverage World (2009).
We estimated beverage consumption in Illinois based on the state’s share of population in the total
U.S. population, adjusting for variability in per capita beverage consumption in the East Central region
(consisting of Illinois, Indiana, Kentucky, Michigan, Ohio, West Virginia and Wisconsin) for CSDs and fruit
drinks, and in the Midwest region (consisting of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota,
Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin) for RTD teas. This approach does not
account for possible variation in beverage consumption within regions that could be due to differences
in demographic characteristics, consumer tastes, and other factors. It is nevertheless preferable to
assuming constant per capita beverage consumption across the nation and is the best option available
given existing data.
Following Andreyeva and colleagues (in press), we estimate future SSB and diet beverage consumption
based on beverage specific historic trends in consumption. Given available data and perceived stability
of trends in consumption, average annual rates of change over the period of 2000-2009 are used for
CSDs, 2005-2009 for fruit beverages, 2006-2009 for sports drinks, 2007-2009 for RTD teas, 20082009 for flavored/enhanced water, 2008-2009 for energy drinks, and 2007-2009 for RTD coffee
(Beverage Marketing Corporation, 2009a,b,c; Beverage World 2007-2010). Based on this approach,
for example, we assumed that CSD consumption (the largest category of consumption) would fall by
0.7 percent annually between 2010 and 2015. The share of diet varieties in CSDs in 2008 was 30.85
percent for the United States, but varied across regions, with a share of 29 percent in the East Central
region that includes Illinois (Beverage Marketing Corporation, 2009a). Given the lack of available data,
we assumed the same share of diet varieties in RTD teas as for CSDs and that only non-diet varieties of
other beverages are available. Based on the increasing market share of diet CSDs, we assumed that the
share of diet varieties in CSDs and RTD teas will increase by 0.5 percentage points annually.
Based on this approach, we estimate that Illinoisans will consume more than 814 million gallons of
refreshment beverages in 2011. Most of this will come in the form of carbonated soft drinks, with most
of these sugar-sweetened carbonated soft drinks. SSBs will account for more than 80 percent of total
consumption – an estimated 620.12 million gallons. Figure 13 shows the estimated distribution of
beverage consumption across beverage types.
In estimating the reductions that would result from alternative excise taxes on SSBs and their diet
versions, we assumed that all beverage purchases would be subject to the excise tax being modeled.
Specifically, we did not exempt purchases made by participants in the Supplemental Nutritional
Assistance Program (SNAP) (as is currently done with the sales tax on beverages bought with SNAP
benefits). If the excise tax is not collected on purchases made by SNAP participants, the impact of
the tax on revenues, obesity and its consequences/costs will be smaller than estimated below.
16
Estimated Annual Beverage Consumption by Beverage Type, Illinois, 2011
27.3
13.1
18.3
15.6
Note: Estimates are in millions of gallons;
textured slices are for non-SSBs.
2.4
Source: Andreyeva, et al., unpublished data.
47.2
62.3
447.0
181.2
Regular Soft Drinks
Diet Soft Drinks
Fruit Drinks
Sports Drinks
RTD Tea - Non-Diet
RTD Tea - Diet
Flavored Water
Energy Drinks
RTD Coffee
Based on the recent review by Andreyeva and colleagues (2010), we assumed that the price elasticity of
demand for beverages was -0.8 for the scenarios which tax all beverages (SSBs and their diet versions).
When modeling the impact of taxes on SSBs only, we use a price elasticity of -1.2 (Smith et al., 2010),
allowing for greater reductions in consumption of SSBs as some consumers would switch to the nontaxed diet options that would be relatively less expensive under this scenario.
Using the estimates of beverage consumption for Illinois in 2011, Table 2 presents estimated
consumption of various beverages for five scenarios: no tax; a one cent per ounce tax on all beverages
considered (CSDs, fruit drinks, sports drinks, RTD teas and coffees, flavored waters, and energy drinks);
a one cent per ounce tax on SSBs only (excludes diet CSDs and RTD teas); a two cent per ounce tax on
all beverages; and a two cent per ounce tax on SSBs only. Given estimated price levels, the alternative
taxes lead to significant increases in beverage prices and substantial reductions in
beverage consumption.
The relative declines in consumption are greater for relatively inexpensive beverages (e.g. CSDs) and
smaller for more expensive beverages (RTD teas and coffees), and the declines in SSB consumption
are greater when taxes are applied to SSBs only, given potential substitution to lower priced, untaxed
beverages (see Figure 14).
17
Table 2
Revenue Impact
Impact of Alternative Beverage Excise Taxes on Beverage Consumption by Type, Illinois, 2011
Note: Figures reflect estimated annual consumption, in millions of gallons, with no tax increase
and following the tax increase specified in first column.
Regular
CSDs
Diet
CSDs
Fruit
Drinks
Sports
Drinks
RTD Tea
- Regular
RTD Tea
- Diet
Flavored
Water
Energy
Drinks
No Tax
447.0
181.2
62.3
1 Cent - All
369.6
149.8
1 Cent SSBs Only
330.9
2 Cents - All
2 Cents SSBs Only
RTD
Coffee
47.2
27.3
13.1
18.3
15.6
2.4
814.3
55.4
39.8
25.0
11.9
15.7
14.9
2.3
684.4
181.2
51.9
36.2
23.8
13.1
14.4
14.6
2.2
668.2
292.2
118.4
48.5
32.5
22.6
10.8
13.1
14.2
2.2
554.5
214.8
181.2
41.5
25.1
20.2
13.1
10.5
13.5
2.1
522.1
Total
The revenue generating potential of beverage excise taxes is considerable. Using the consumption
estimates obtained above under the alternative scenarios and applying the tax modeled in each scenario,
we estimate the revenue generated by each option. As expected, broader based taxes (those that include
diet as well as SSBs) generate higher revenues, as do higher taxes (although not proportionately given
the additional reductions in consumption as the tax rises). We estimate that a one-cent per ounce tax
on SSBs only would generate for the government of Illinois about $607 million in 2011, while a two cent
per ounce tax on SSBs and diet beverages would generate moer than $1.4 billion in 2011. The excise tax
revenues generated under each scenario are illustrated in Figure 15.
Figure 15
Estimated Revenues, Alternative Tax Scenarios, Illinois, 2011
Source: Andreyeva, et al., unpublished data.
2 Cents - SSBs Only
$839.2
Figure 14
Estimated SSB Consumption, Alternative Tax Scenarios, Illinois, 2011
2 Cents - All
$1,419.5
Source: Andreyeva, et al., unpublished data.
620.1
1 Cent - SSBs Only
600
$606.6
522.7
500
473.9
1 Cent - All
$876.0
Million Gallons
425.2
400
327.8
300
100
18
$400.0
$800.0
$1,200.0
$1,600.0
Millions
Impact on Frequency of SSB Consumption
200
0
$0.0
No Tax
1 Cent - All
1 Cent SSBs Only
2 Cents - All
2 Cents SSBs Only
We estimate age- and gender-specific frequency of self-reported SSB consumption for Illinois using data
from the 2007-08 National Health and Nutrition Examination Survey (NHANES). Specifically, we estimate
the percentage of males and females ages 2-19, 20-44, 45-64, and 65 and older consuming SSBs less
than once per week; one or more times per week but less than daily; one to two times per day, and two or
more times per day (assuming 12 ounces consumed per occasion). Tax-induced changes in the frequency
of SSB consumption are estimated for each tax scenario, assuming the same price elasticities as used in
the revenue estimation (-0.8 for a broad based tax and -1.2 for an SSB only tax). Given a lack of age- and
gender-specific price elasticities, we assumed it to be constant across subpopulations. Figures 16-20
depict the predicted changes in the frequency of SSB consumption for age groups 2-19, 20-44, 45-64,
65 and older, and 2 and older.
19
Figure 16
Figure 19
Estimated Frequency of Weekly SSB Consumption, Alternative Tax Scenarios, Ages 65 and Older
40.0
35.0
30.0
Male
Female
1 Cent - SSBs Only
20.0
2 Cents - All
10.0
Total
Male
Female
2+/day
1-2/day
1/wk-<1/d
<1/week
2+/day
1-2/day
1/wk-<1/d
2 Cents - SSBs Only
<1/week
0.0
2+/day
1-2/day
1/wk-<1/d
<1/week
2+/day
1-2/day
1/wk-<1/d
<1/week
2+/day
<1/week
1-2/day
2 Cents - SSBs Only
0.0
1 Cent - All
30.0
2+/day
2 Cents - All
1 Cent - SSBs Only
Baseline
40.0
1-2/day
10.0
5.0
50.0
1/wk-<1/d
1 Cent - All
Baseline
60.0
<1/week
25.0
20.0
15.0
Percent Consuming
70.0
1/wk-<1/d
Percent Consuming
Estimated Frequency of Weekly SSB Consumption, Alternative Tax Scenarios, Ages 2-19
Total
Figure 17
Figure 20
Estimated Frequency of Weekly SSB Consumption, Alternative Tax Scenarios, Ages 2 and Older
Male
Female
Total
Estimated Frequency of Weekly SSB Consumption, Alternative Tax Scenarios, Ages 45-64
60.0
Percent Consuming
1 Cent - SSBs Only
10.0
2 Cents - All
50.0
40.0
Baseline
30.0
1 Cent - All
20.0
1 Cent - SSBs Only
10.0
2 Cents - All
Female
2+/day
1-2/day
1/wk-<1/d
<1/week
2+/day
1-2/day
2 Cents - SSBs Only
1/wk-<1/d
0.0
Male
Figure 18
Total
As expected, the frequency of heavy SSB consumption (2 or more times per day) falls sharply in
response to the imposition of a beverage tax, with larger reductions for a SSB only tax and for a higher
tax, while the frequency of occasional SSB consumption (less than once per week) rises sharply.
Changes for occasional (less than daily) and moderate users (1-2 times per day) are fairly modest,
reflecting the movement of some previously in these categories to less frequent consumption categories
and the movement of some from more frequent consumption categories into these categories. Given
the more frequent consumption of SSBs among younger populations and males, the greatest reductions
occur in youth and young adult males, while relatively smaller reductions are seen in older populations
and women.
2 Cents - SSBs Only
Male
Female
Total
2+/day
1-2/day
1/wk-<1/d
<1/week
2+/day
1-2/day
1/wk-<1/d
<1/week
2+/day
1-2/day
1/wk-<1/d
<1/week
0.0
20
20.0
<1/week
2+/day
1-2/day
1/wk-<1/d
<1/week
2+/day
1-2/day
1/wk-<1/d
<1/week
2+/day
1-2/day
1/wk-<1/d
2 Cents - SSBs Only
1 Cent - All
2+/day
2 Cents - All
Baseline
30.0
1-2/day
1 Cent - SSBs Only
40.0
1/wk-<1/d
1 Cent - All
50.0
<1/week
Baseline
Percent Consuming
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
<1/week
Percent Consuming
Estimated Frequency of Weekly SSB Consumption, Alternative Tax Scenarios, Ages 20-44
21
Impact on the Incidence and Health Care Costs of Diabetes
Several studies have demonstrated the role of SSB consumption in development of type 2 diabetes
(e.g. Schultze, et al., 2004; Malik, et al., 2010). The CDC estimates that the age-adjusted incidence of
diabetes was 8.8 per 1,000 population 18 to 79 years old in 2009 (CDC, 2011). The incidence of type
2 diabetes rises dramatically with age, from 4.6 per 1,000 among 18-44 year olds to 15.2 per 1,000
among 45-64 year olds. While still rare, the incidence of type 2 diabetes among youth (under age 20)
is rising; based on data from the SEARCH Writing Group (2007), we estimate that the incidence is
5 per 100,000. The risk differs across adult population subgroups, with somewhat higher risk for men
than women (9.2 and 8.4 per 1,000, respectively) and significantly higher risks for Blacks and Hispanics
(11.7 and 13.1 per 1,000, respectively) than for Whites (8.5 per 1,000).
Using data on these risks and the age, gender, and racial/ethnic composition of the Illinois population,
we estimate that approximately 94,500 new cases of diabetes are diagnosed each year in Illinois, with
disproportionately higher shares among minority populations. Most of these new cases are preventable,
including through tax-induced reductions in SSB consumption. The best clinical evidence on the impact
of SSB consumption on diabetes risk comes from the prospective cohort study conducted by Schultze
and colleagues (2004). They followed 91,249 women free of diabetes and other chronic diseases at
baseline and found 741 cases of type 2 diabetes in these women between 1991 and 1999. Of relevance
for our estimates, they found that women who consumed one or more SSBs per day increased their
risk of type 2 diabetes by 83 to 98 percent compared to those consuming less than one per week.
Using their age adjusted results, we estimate that the relative risks for different frequencies of SSB
consumption are 1 (< 1 per week), 1.32 (once or more but less than daily), 1.63 (≥1 but <2 per day),
and 2.37 (≥2 per day). Using the population impact fraction framework described by Wang (2010),
we estimate the proportion of new diabetes cases that would be prevented in 2011 by the tax-induced
reductions in the frequency of SSB consumption described in the previous section, with age- and
gender-specific estimates. These estimates are presented in Table 3. The predicted reductions in the
incidence of type 2 diabetes vary between 2.4 and 7.3 percent of the new cases estimated to occur in
2011, with relatively larger reductions among younger, male populations given their greater frequency of
SSB consumption.
Table 3
The estimated tax-induced reductions in the incidence of diabetes in the first year understate the long-run
impact of the tax on diabetes. New cases of diabetes will continue to decline in the years to come driven
by further reductions in SSB consumption due to the tax. Assuming a constant reduction in the incidence
of diabetes each year, we estimate a cumulative reduction of about 23,000 to 69,000 new cases of
diabetes in the coming decade, depending on the size and extent of the beverage tax.
Reducing the incidence of diabetes would significantly lower the related health care spending. Recent
estimates indicated that people with diabetes spend more than twice as much on medical care as they
would have in the absence of the disease and that about 10 percent of overall health care expenditures
can be attributed to diabetes (American Diabetes Association (ADA), 2008). To estimate the health
care costs savings that would result from the tax-induced reductions in diabetes, we use the ADA’s
(2008) estimates of diabetes-related costs by age in 2007, updated for inflation using the medical care
component of the consumer price index. The average annual cost for diagnosed diabetes is about $6,000
per case. The total savings would be considerably higher given that an average diabetes case is also
associated with $3,326 annually in nonmedical costs such as absenteeism, reduced productivity at work,
disability that prevents working, reduced non-workforce labor and early mortality (Dall et al., 2010).
Figure 21 shows the estimated reductions in health care costs of diabetes for the four alternative
beverage tax scenarios. Given the larger reductions in diabetes incidence from higher SSB-only taxes,
the avoided costs from these taxes would be most substantial. The long-term cost savings would be
considerably higher. Given the greater consumption of SSBs and, as a result, greater incidence of
diabetes in low-income populations, a disproportionate share of these cost savings would accrue to the
state’s Medicaid program.
Figure 21
Reductions in Diabetes-Related Health Care Costs, Alternative Tax Scenarios, Illinois, 2011
Impact on Caloric Intake and Body Weight
2 Cents - SSBs Only
$41.3
Reduction in New Cases of Type 2 Diabetes, Alternative Tax Scenarios, Illinois, 2011
Note: Numbers may not add to total given rounding of estimates.
22
2 Cents - All
Ages 2-19
Ages 20-44
Ages 45-64
Ages 65+
1 Cent - All
3
729
1,252
310
2,295
1 Cent SSBs Only
5
1,094
1,878
465
3,443
2 Cents - All
7
1,459
2,505
620
4,590
2 Cents SSBs Only
10
2,188
3,757
930
6,885
$27.6
Total
1 Cent - SSBs Only
$20.7
1 Cent - All
$13.8
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
Millions
23
Using the estimates above of the age- and gender-specific changes in SSB consumption frequency, we
estimate the daily reduction in calories consumed from SSBs for each tax scenario. The estimated
reductions are presented by age and gender in Figure 22. Younger men have the largest reductions in
calories due to high SSB consumption. For a one cent per ounce tax on SSBs only, we estimate that
2-19 year old males would consume 46 fewer calories from SSBs daily and that 20-44 year old males
would consume 55 fewer SSB calories per day, compared to 32 and 16 fewer calories for 45-64 year old
and 65 and older males. Among women, the reductions would be 36, 38, 22, and 10 calories from SSBs
per day among those ages 2-19, 20-44, 45-64 and 65 and older, respectively. As with SSB consumption,
larger reductions in caloric intake result from a tax limited to SSBs only, as do higher taxes regardless of
the base on which the tax is applied.
Figure 22
Reductions in Average Daily Caloric Intake from SSBs by Age and Gender, Alternative Tax Scenarios, Illinois, 2011
100
Based on these assumptions, we estimate that the alternative beverage taxes would lead to significant
reductions in average body weight at the population level, with greater reductions among young males
given their greater frequency of SSB consumption. The estimated age- and gender-specific reductions in
average body weight are shown in Figure 23. We estimate that a one-cent tax on SSBs only would reduce
average body weight among Illinoisans ages two and older by about 1.7 pounds.
80
Figure 23
60
Reductions in Body Weight by Age and Gender, Alternative Tax Scenarios, Illinois, 2011
40
1 Cent - All
6.0
1 Cent - SSBs Only
20
2 Cents - All
0
2-19 20-44 45-64
65+
2-19 20-44 45-64
Female
65+
2-19 20 -44 45 -64
65+
4.7
4.6
4.0
Total
We use these estimated reductions in average daily caloric intake to model the impact of alternative
beverage taxes on BMI and obesity prevalence. There are two key assumptions in translating reductions
- All
1 in
Cent
- SSBs
Only and 2obesity.
Cents - AllThe first
2 Cents
- SSBs
in caloric intake1 Cent
to reductions
body
weight
relates
to Only
the extent to which the taxinduced reduction in calories from SSBs is offset by increases in calories from other sources such as food
and non-taxed caloric beverages like juice and milk. Current research is mixed on the extent of substitution
in response to changes in relative beverage prices, including those that result from the existing small sales
taxes on various beverages. Fletcher and colleagues (2010), for example, conclude that reductions in
SSB calories from higher SSB prices are largely offset in children and adolescents by increases in calories
from other beverages, particularly whole milk, resulting in little impact on weight. In contrast, Smith and
colleagues (2010) find only modest increases in calories from other caloric beverages when SSB calories
fall in response to tax-induced SSB price increases. As a result, the authors predict that a 20 percent tax
on SSBs would reduce obesity prevalence by 3 percentage points in adults and 2.9 percentage points in
children. These are substantial reductions.
5.5
5.0
2 Cents - SSBs Only
Male
24
The second key assumption relates to translating a reduction in net caloric intake to weight change
(i.e. calories to pounds). There is considerable confusion around the extent to which reduced calories
lead to reductions in weight (Katan and Ludwig, 2010). We use the estimates developed by Hall and
colleagues (Hall, et al., 2009; Hall and Jordan, 2008) in their models that account for the human
physiology of energy regulation. Their models predict that a reduction in caloric intake of about 10
calories per day will reduce weight by about one pound in the steady state.
Pounds
Reduced Calories Per Day
120
Research findings on the impact of existing small taxes on weight outcomes are generally consistent with
Smith et al., (2010) and suggest limited BMI effects of small taxes, but that point estimates imply that
large taxes could lead to sizable reductions in weight and obesity, particularly in higher risk populations
(Powell and Chriqui, in press). To be conservative, we assume that half of the tax-induced reductions in
calories consumed from SSBs will be offset by increases in calories from other sources. If there is less
compensation, then the impact of the alternative taxes on obesity prevalence and related health care
costs will be greater.
3.2
3.0
4.1
3.8
3.6
2.7
2.3
2.0
1.6
1.8
1.9
2.1
1.1
0.8
1.0
0.0
1.6
2.2
2.7
2.3
1.3
1.0
1.3
0.6
0.5
1 Cent - All
1 Cent - SSBs Only
2 Cents - All
2 Cents - SSBs Only
2-19
20-44 45-64
65+
Male
2-19
20-44 45-64
65+
2-19
Female
1 Cent - All
1 Cent - SSBs Only
20-44 45-64
65+
Total
2 Cents - All
2 Cents - SSBs Only
25
Impact on Obesity and Obesity-Related Health Care Costs
Using the estimated reductions in weight described above, we further estimate the impact of alternative
beverage taxes on the prevalence of obesity in Illinois and obesity-related health care costs. Data on
adult obesity rates by age and gender come from the 2009 Behavioral Risk Factor Surveillance System
data for Illinois, with the age-specific rates adjusted in proportion to the gender-specific rates to produce
estimates for males and females ages 18-44, 45-64, and 65 and older. Gender specific estimates of
obesity prevalence for children ages 2-17 are obtained using data from the 2007 National Survey of
Children’s Health (Singh, et al., 2010; for gender specific rates for youth ages 10-17), and the 20072008 NHANES (assuming that the relative rates for 2-9 year olds and 10-17 year olds nationally apply
to Illinois children). Using this approach, we estimate that 25.2 percent of the Illinois population ages
two and older is obese, with age specific prevalence rates of 17.5, 24.5, 33.0, and 24.7 percent among
those ages 2-17, 18-44, 45-64, and 65 and older, respectively. Obesity rates among males in each age
group are about 10 percent higher than among females.
We use age- and gender-specific average height data from NHANES to translate the predicted reductions
in weight into reductions in age- and gender-specific BMI. We further assume that reductions in BMI
that result from the alternative taxes will move a fraction (1/5th) of people with BMI in the obese
range (≥ 30) to the non-obese range. Given these assumptions, we estimate age and gender specific
reductions in obesity prevalence that would result from the alternative beverage taxes. These estimates
are shown in Figure 24.
The alternative beverage taxes would lead to significant reductions in obesity prevalence. For example,
we estimate that a one-cent tax on SSBs only would reduce obesity prevalence among 12-17 year
olds to 15.9 percent, implying 45,000 fewer obese children in Illinois. Similarly, this tax would reduce
obesity prevalence among 18-44 year olds to 22.7 percent and among 45-64 year olds to 31.6 percent,
reducing the number of obese adults in these age groups by about 85,000 and 45,000, respectively.
The overall obesity rate in Illinois would fall from 25.2 percent to 23.7 percent, reflecting a more than
185,000 reduction in the number of obese Illinoisans. Again, SSB only taxes produce larger reductions in
obesity prevalence than broader based taxes that include diet beverages, and higher taxes lead to more
substantial declines in obesity rates.
Finally, given the considerable health care costs estimated to result from obesity, we use these
reductions in obesity prevalence to estimate the impact of alternative beverage taxes on health care
costs attributable to obesity in Illinois. A growing literature demonstrates that obese individuals spend
significantly more on health care to treat the consequences of their obesity (Finkelstein, et al., 2009;
Wee et al., 2005). To estimate the impact of the tax induced reductions in obesity prevalence on health
care spending, we use age and gender specific adult cost estimates from Wee and colleagues (2005),
updated for inflation using the Medical Care Price Index. They estimate that obesity-related health care
costs are higher for women than for men and that these costs rise with age for both genders.
Based on the recent study by Skinner and colleagues (2008) that found no excessive health care costs
for overweight children relative to normal weight peers, we assume no reduction in health care costs for
the youngest age group (ages 2-17). As a result, our estimates will be conservative with respect to the
long term cost savings that result from the tax induced declines in SSB consumption and obesity. That
is, the reductions in obesity among young people will lead to significant reductions in future health care
costs caused by obesity.
The estimated health care cost savings in Illinois in 2011 from tax-induced reductions in obesity are
shown in Figure 25. We estimate that a one-cent tax on SSBs only, for example, would reduce health
care spending attributable to obesity by more than $150 million in the first year alone. Over time,
26
the cumulative effects of savings in health care spending will grow; assuming that the annual cost
savings are constant over time a one-cent SSB only tax would save more than $1.5 billion in health
care spending in Illinois over the next decade. Given the higher prevalence of obesity in lower-income
populations, a disproportionate reduction in obesity-related health care spending would be seen in the
state’s Medicaid program. As with the reductions in diabetes, the total benefits for the Illinois economy
would be substantially higher and include reductions in other costs associated with obesity, including
reduced productivity, absenteeism, and disability.
Figure 24
Obesity Prevalence Rates by Age and Gender, Alternative Tax Scenarios, Illinois, 2011
Note: the percentages shown on the bar graphs reflect the estimated obesity prevalence rate
that would result from a one-cent per ounce tax on SSBs only.
35.0%
32.8%
30.0%
25.2%
23.5%
25.0%
20.0%
31.6%
30.4%
23.2%
21.9%
16.8%
15.9%
15.0%
15.0%
24.0%
22.7%
Baseline
10.0%
1 Cent - All
1 Cent - SSBs Only
5.0%
0.0%
2 Cents - All
2 Cents - SSBs Only
2-17 18-44 45-64
65+
2-17 18-44 45-64
Male
65+
2-17 18-44 45-64
Female
65+
Total
Figure 25
Reductions
in- Obesity-Related
Health
Baseline
1 Cent
All
1 Cent - SSBs
Only
Care
Costs,
Scenarios,
Illinois, 2011
2 Cents
- AllAlternative
2 Cents Tax
- SSBs
Only
$301.6
2 Cents - SSBs Only
$201.0
2 Cents - All
$150.8
1 Cent - SSBs Only
1 Cent - All
$100.5
$0.0
$50.0
$100.0
$150.0
Millions
$200.0
$250.0
$300.0
27
Table 4
Section IV
Estimated Impact of Alternative Beverage Excise Taxes, Illinois, 2011
Discussion
The increasing recognition of the role of sugar-sweetened beverages (SSBs) in
contributing to the growing obesity epidemic has spurred interest in policy and other
interventions that aim to reduce SSB consumption. Given the demonstrated effectiveness
of increased tobacco taxes in reducing cigarette smoking and other tobacco product
use, many have proposed SSB taxes that would lead to sizable increases in prices as a
promising policy option for curbing obesity and its health and economic consequences.
To date, however, existing SSB taxes are mostly small sales taxes that are applied to both
sugar-sweetened and diet beverages. Research assessing the impact of these small taxes
generally finds that they have modest effects on beverage consumption and a limited
impact on weight. At the same time, estimates from these studies suggest that larger taxes
would have a substantial impact on the prevalence of obesity at the population level.
Reduction
in Health
Care Costs
of Diabetes
Reduction
in Number
of Obese
Youth (2-17)
Reduction
in Number
of Obese
Adults (18+)
Reduction
in Number
of Obese
Illinoisans
Reduction
in Diabetes
Incidence
1 Cent - All
6.2%
3.5%
123,418
2,294
$13.8
$100.5
$876.1
1 Cent SSBs Only
9.3%
5.2%
185,127
3,442
$20.7
$150.8
$606.7
2 Cents - All
12.3%
7.0%
246,836
4,591
$27.6
$201.0
$1,419.6
2 Cents SSBs Only
18.5%
10.5%
370,253
6,885
$41.3
$301.6
$839.3
(millions)
Reduction New Tax
in Obesity- Revenues
Related
(millions)
Health Care
Costs (millions)
Given the potential for SSB taxes to reduce obesity, we use the best available data and research-based
evidence to estimate the impact of alternative beverage taxes in Illinois. Specifically, we consider four
alternative beverage taxes – a one cent per ounce excise tax on SSBs and their diet versions (i.e.,
all beverages); a one cent per ounce excise tax on SSBs only; a two cent per ounce excise tax on all
beverages; and a two cent per ounce excise tax on SSBs only. Using recent data, we predict their impact
on overall beverage consumption, tax revenues, age and gender-specific frequency of SSB consumption,
average daily caloric intake, body weight, body mass index (BMI), obesity prevalence diabetes incidence,
and health care costs of diabetes and obesity. Table 3 below summarizes our estimates.
Given the continued reduction in SSB consumption following the alternative beverage taxes, the impact
of the tax will grow over time as additional new diabetes cases will be prevented and as the long-term
costs resulting from childhood obesity are averted. To the extent that a portion of the new revenues
generated by the tax are used to support obesity prevention and reduction programs in Illinois, the future
declines in obesity prevalence and the resulting disease and costs will be even larger.
In summary, sizable new SSB taxes would be a win-win for Illinois – they would generate considerable
new revenues, and lead to reductions in SSB consumption, obesity, and the resulting disease burden
and health care costs. As seen with tobacco tax increases that earmarked a portion of new revenues
for comprehensive tobacco prevention and cessation programs that further reduced tobacco use and
its consequences, using the same approach with SSB tax revenues would lead to further reductions in
obesity while at the same time increasing public support for such taxes.
28
29
Literature Cited
American Diabetes Association (2008). Economic
costs of diabetes in the U.S. in 2007. Diabetes Care
31(3):596-615.
Andreyeva T, Chaloupka FJ, Brownell KD (in press).
Estimating the beverage tax potential to reduce
beverage consumption and generate revenue. Preventive
Medicine.
Andreyeva T, Long M, Brownell KD (2010). The impact
of food prices on consumption: a systematic review
of research on price elasticity of demand for food.
American Journal of Public Health 100: 216-222.
Babey SH, Jones M, Yu H, Goldstein H (2009). Bubbling
Over: Soda Consumption and Its Link to Obesity in
California. Los Angeles: California Center for Public
Health Advocacy & UCLA Center for Health Policy
Research, 2009.
Beer Institute (2011). Brewers Almanac, 2010.
Washington DC: Beer Institute.
Besley TJ, Rosen HS (1999). Sales taxes and prices: an
empirical analysis. National Tax Journal 52(2):157.
Beverage Marketing Corporation (2009). Carbonated
Soft Drinks in the U.S. 2009 Edition, Chapter 3,
September 2009. Beverage Marketing Corporation of
New York.
Beverage Marketing Corporation. (2009) Fruit
Beverages in the U.S. 2008 Edition, Chapter 2, July
2009. Beverage Marketing Corporation of New York.
Beverage Marketing Corporation. (2009) RTD Tea in
the U.S. 2009 Edition, Chapter 3, September 2009.
Beverage Marketing Corporation of New York.
Beverage World. (2009) State of the Industry ’09.
Chicago: Beverage World.
Beverage World. (2010) State of the Industry 2010.
Liquid Refreshment Beverages. Chicago: Beverage
World.
Beverage World. (2008) State of the Industry ’08.
Chicago: Beverage World.
Beverage World. (2007) State of the Industry ’07.
Chicago: Beverage World.
30
Bleich, S. N., Wang, Y. C., Wang, Y., & Gortmaker, S. L.
(2009). Increasing consumption of sugar-sweetened
beverages among US adults: 1988-1994 to 1999-2004.
American Journal of Clinical Nutrition, 89, 372-381.
Brownell KD, Farley T, Willett WC, Popkin B, Chaloupka
FJ, et al., (2009). The public health and economic
benefits of taxing sugar-sweetened beverages. The New
England Journal of Medicine 361(16):1599-1605).
Finkelstein EA, Trogdon JG, Cohen JW, Dietz W (2009).
Annual medical spending attributable to obesity:
payer- and service-specific estimates. Health Affairs
18(5):w822-w831.
Finkelstein EA, Zhen C, Nonnemaker J, Todd JE (2010).
Impact of targeted beverage taxes on higher- and
lower-income households. Archives of Internal Medicine
170(22):2028-2034.
Flegal KM, Carroll MD, Ogden CL, Curtin LR (2010).
Prevalence and trends in obesity among US adults,
1999-2008. Journal of the American Medical
Association 303(3):235-241.
Brownell KD, Frieden TR (2009). Ounces of prevention-the public policy case for taxes on sugared beverages.
New England Journal of Medicine 360:1805-1808.
Fletcher JM, Frisvold DE, Tefft N (2010). The effects of
soft drink taxes on child and adolescent consumption
and weight outcomes. Journal of Public Economics 94
(11-12): 967-974.
Centers for Disease Control and Prevention
(2009). Recommended community strategies and
measurements to prevent obesity in the United States.
Morbidity and Mortality Weekly Report 58(RR-7).
Gortmaker S, Long M, Wang YC (2009). The Negative
Impact of Sugar-Sweetened Beverages on Children’s
Health. Minneapolis: Healthy Eating Research.
Centers for Disease Control and Prevention (2011).
CDC’s Diabetes Program - Data & Trends, www.cdc.gov/
diabetes/statistics.
Chaloupka FJ (2010). Tobacco Control Lessons
Learned: The Impact of State and Local Policy.
ImpacTeen Research Paper Number 38. Chicago:
ImpacTeen, Health Policy Center, Institute for Health
Research and Policy, University of Illinois at Chicago.
Chriqui JF, Chaloupka FJ, Powell LM (in progress).
A typology of sugar-sweetened beverage taxation:
multiple approaches for obesity prevention and revenue
generation. Chicago: Health Policy Center, Institute
for Health Research and Policy, University of Illinois at
Chicago.
Hahn R (2009). The potential economic impact of a
US excise tax on selected beverages: a report to the
American Beverage Association, August 31, 2009.
Hall KD, Guo J, Dore M, Chow CC (2009). The
progressive increase of food waste in America and its
environmental impact. PLoS One 4(11):e7940.
Lakdawalla D, Philipson T (2009). The growth of obesity
and technological change. Economics and Human
Biology 7(3):283-293.
Lin BH, Smith TA, and JY Lee, 2010, The Effects of a
Sugar-Sweetened Beverage Tax: Consumption, Calorie
Intake, Obesity, and Tax Burden by Income, Working
Paper, US Department of Agriculture.
Malik VS, Popkin BM, Bray GA, Després JP, Willett WC,
Hu FB (2010). Sugar-sweetened beverages and risk
of metabolic syndrome and type 2 diabetes: a metaanalysis. Diabetes Care 33(11):2477-2483.
Malik VS, Schulze MB, Hu FB (2006). Intake of sugarsweetened beverages and weight gain: a systematic
review. American Journal of Clinical Nutrition 84(2):274288.
McTigue KM, Garrett JM, Popkin BM (2002). The natural
history of the development of obesity in a cohort of
young US adults between 1981 and 1998. Annals of
Internal Medicine 136(12):857-864.
National Center for Health Statistics (2008). Prevalence
of overweight, obesity, and extreme obesity among
adults: United States, trends 1976-80 through 200506. On-line at: http://www.cdc.gov/nchs/data/hestat/
overweight/overweight_adult.pdf.
Hall KD, Jordan PN (2008). Modeling weight-loss
maintenance to help prevent body weight regain.
American Journal of Clinical Nutrition 88(6):1495-1503.
National Health, Lung, and Blood Institute (1998).
Clinical Guidelines on the Identification, Evaluation,
and Treatment of Overweight and Obesity in Adults: The
Evidence Report. Washington DC: National Heart, Lung,
and Blood Institute, National Institutes of Health.
Institute of Medicine (2005). Preventing Childhood
Obesity: Health in the Balance. Washington DC: The
National Academies Press.
Nielsen SJ, Popkin BM (2004). Changes in beverage
intake between 1977 and 2001. American Journal of
Preventive Medicine 27(3):205-210.
Institute of Medicine (2009). Local Government Actions
to Prevent Childhood Obesity. Washington DC: The
National Academies Press.
Ogden C, Carroll M (2010). Prevalence of obesity among
children and adolescents: United States, trends 19631965 through 2007-2008. National Center for Health
Statistics Health E-Stats. On-line at: http://www.cdc.
gov/nchs/data/hestat/obesity_child_07_08/obesity_
child_07_08.pdf
Chriqui JF, Eidson SS, Bates H, Kowalczyk S, Chaloupka
FJ (2008). State sales tax rates for soft drinks and
snacks sold through grocery stores and vending
machines, 2007. Journal of Public Health Policy
29:226-49.
International Agency for Research on Cancer (in press).
IARC Handbooks of Cancer Prevention, Tobacco Control,
Volume 14: Effectiveness of Tax and Price Policies in
Tobacco Control. Lyon, France: International Agency for
Research on Cancer.
Dall TM, Zhang Y, Chen YJ, Quick WW, Yang WG, Fogli
J. (2010). The economic burden of diabetes. Health
Affairs 29(2):297-303.
Katan MB, Ludwig DS (2010). Extra calories cause
weight gain - but how much? Journal of the American
Medical Association 303(1):65-66.
Orzechowski and Walker (2011). The Tax Burden on
Tobacco. Arlington VA: Orzechowski and Walker.
Popkin BM, Duffey KJ (2010). Sugar and artificial
sweeteners: seeking the sweet truth. In Nutrition and
Health: Nutrition Guide for Physicians, T Wilson, et al.,
editors. New York: Humana Press.
31
Powell LM, Chiriqui J, Chaloupka FJ (2009).
Associations between state-level soda taxes and
Adolescent Body Mass Index. Journal of Adolescent
Health 45:S57-S63.
Powell LM, Chriqui JF (in press). Food taxes and
subsidies: evidence and policies for obesity prevention.
In Handbook of the Social Science of Obesity, J Cawley
editor. Oxford: Oxford University Press.
Schulze MB, Manson JE, Ludwig DS, et al. (2004).
Sugar-sweetened beverages, weight gain, and
incidence of type 2 diabetes in young and middle-aged
women. Journal of the American Medical Association
292(8):927-934.
SEARCH for Diabetes in Youth Study Group Writing
Group (2007). Incidence of diabetes in youth in
the United States. Journal of the American Medical
Association 297(24):2716-2724.
Singh GK, Kogan MD, van Dyck PC (2010). Changes
in state-specific childhood obesity and overweight
prevalence in the United States from 2003 to
2007. Journal of the American Medical Association
164(7):598-607.
Skinner AC, Mayer ML, Flower K, Weinberger M (2008).
Health status and health care expenditures in a
nationally representative sample: how do overweight
and healthy-weight children compare? Pediatrics
121:e269-e277.
Smith A (1776). An Inquiry into the Nature and Causes
of the Wealth of Nations. E. Canaan, editor. London:
Methuen & Co., Ltd.
Smith, Travis A., Biing-Hwan Lin, and Jonq-Ying Lee.
Taxing Caloric Sweetened Beverages: Potential Effects
on Beverage Consumption, Calorie Intake, and Obesity,
ERR-100, U.S. Department of Agriculture, Economic
Research Service, July 2010.
Sturm R, Powell LM, Chriqui JF, Chaloupka FJ (2010).
Soda taxes, soft drink consumption, and children’s
Body Mass Index. Health Affairs 29(5):1052-1058.
The NS, Suchindran C, North KE, Popkin BM, GordonLarsen P (2010). Association of adolescent obesity
with risk of severe obesity in adulthood. Journal of the
American Medical Association 304(18):2042-2047.
U.S. Department of Health and Human Services
(USDHHS). 2001. The Surgeon General’s Call to Prevent
and Decrease Overweight and Obesity. Rockville, Md.:
USDHHS, Public Health Service, Office of the Surgeon
General.
Vartanian LR, Schwartz MB, Brownell KD (2007). Effects
of soft drink consumption on nutrition and health: a
systematic review and meta-analysis. American Journal
of Public Health 97(4):667-675.
Wagenaar A.C.; Salois, M.J.; and Komro, K.A. Effects
of beverage alcohol price and tax levels on drinking:
A meta-analysis of 1003 estimates from 112 studies.
Addiction 104:179–90, 2009.
Wagenaar, A.C., Tobler, A.L., Komro, K.A. (2010). Effects
of Tax and Prices Policies on Mobility and Mortality:
A Systematic Review, American Journal of Public
Health. Published on-line ahead of print at: http://
ajph.aphapublications.org/cgi/content/abstract/
AJPH.2009.186007v1
Wang YC (2010). The potential impact of sugarsweetened beverage taxes in New York State. A Report
to the NYC Department of Health and Mental Hygiene.
New York: Department of Health Policy & Management,
Mailman School of Public Health, Columbia University.
Wang YC, Bleich SN, Gortmaker SL. Increasing Caloric
Contribution From Sugar-Sweetened Beverages and
100% Fruit Juices Among US Children and Adolescents,
1988-2004. Pediatrics 2008;121:e1604-e1614.
Wee CC, Phillips RS, Legedza AT, et al. (2005). Health
care expenditures associated with overweight and
obesity among US adults: importance of age and race.
American Journal of Public Health 95(1):159-165.
Woodward-Lopez G, Kao J, Ritchie L (2011). To what
extent have sweetened beverages contributed to the
obesity epidemic? Public Health Nutrition 14(3):499509.
World Health Organization (2010). WHO Technical
Manual for Tobacco Tax Administration. Geneva: World
Health Organization.
Xu X, Chaloupka FJ (in press). The effects of prices on
alcohol Use and its consequences. Alcohol Research &
Health.
Yale Rudd Center (2009). Soft Drink Taxes: A Policy
Brief. New Haven: Rudd Center, Yale University.
32
2