Soda Taxes

April 28, 2016

Harvard study: Philly's soda tax would save $197 million in health-care costs

Sugary drinks tax would increase soda prices 49 percent, lead to 36,000 fewer cases of obesity

Philadelphia's proposed sugary drinks tax would prevent approximately 36,000 cases of obesity and save $197 million by 2025, according to a non-peer-reviewed analysis from Harvard University.

The research brief also projects that the tax would prevent 730 deaths over 10 years and lead to 2280 fewer diabetes cases per year.

"Greater health benefits will accrue to low-income consumers who on average consume more [sugar-sweetened beverages] than higher income consumers," the report noted.

Public health researcher Steven Gortmaker led the study as part of the CHOICES project, which has investigated around 40 different obesity-prevention strategies for cost effectiveness. The research team is funded by the JPB Foundation, the Robert Wood Johnson Foundation and the Donald and Sue Pritzker Nutrition and Fitness Initiative.

"It is just a total winner of a policy from a public health perspective," Gortmaker told the Philadelphia Inquirer.

Mayor Jim Kenney has proposed a tax of 3 cents per ounce on all beverages with caloric sweeteners added; 100-percent juice, milk and zero-calorie drinks would not be affected.

The study assumes that the full price of the tax on bottlers will be passed on to consumers and would result in a 49 percent price increase on sugary drinks. That price increase, in turn, should lead to a 59 percent decrease in soda purchases — based on previous research which estimated that every 1 percent increase in the price of sugary beverages leads to a 1.21 percent decrease in sales.  

"While it is possible that the response to prices would be higher or lower (which is reflected in the range of estimates used in our study), we do not believe that it is likely that consumption would go to zero," said researcher and co-author Katie Giles in an e-mail to PhillyVoice.

Net savings on health-care costs would be $197 million, but that number doesn't take into account the costs to bottlers or the $400 million in revenue the city says it will raise in five years. The low end of the report's estimate range was $60 million in savings, while the high end was $527 million.

To construct a model of the effect of the tax on public health, Gortmaker used statistics from several previous studies on the relationship between sugary drinks, obesity and diabetes. That includes four large-scale studies that estimated how much impact drinking fewer sugary beverages had on the body-mass index and one study that looked at the same effect in youth.

When Mexico passed a tax on soda in 2014, it led to a 12 percent increase in price and a 12 percent decline in sales. However, it is too soon to say whether the tax has had an impact on public health. A 2010 study on sales taxes on soft drinks in the U.S. found that consumers tended to just switch to other high-calorie drinks instead.

While supporters of the tax have mostly discussed how the revenue raised will be used for universal pre-K and public parks, the effect on public health is also a factor. American children and adults are consuming twice as many calories from sugar-sweetened drinks as they did 30 years ago.

Read the full study here.

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