Does taxing unhealthy foods work?

Researchers with the Urban Institute have concluded that while well-designed taxes on certain products may cause people to turn to more nutritious options, it’s no guarantee they will have the desired effect and could even impose burdens without any benefit to consumers.

Health advocates and policymakers have been discussing for years whether to combat the U.S. obesity crisis by placing special taxes on unhealthy foods and drinks such as sugary sodas and processed foods. Some countries, including Denmark, Finland, France, Hungary, Mexico and Norway, have levied taxes on specific foods.

In the U.S., 20 states have put higher taxes on soft drinks than on other foods. This year Berkeley, Calif., became the first city to pass a soda tax, and the Navajo nation has similar taxes. Targeted taxes have been shot down elsewhere, including in New York City, where a judge knocked down its ban on sodas bigger than 16 ounces.

The existing taxes provide plenty of data for researchers to study when trying to figure out whether taxes are effective in improving Americans’ diets. The Urban Institute scholars found mixed results.

Initial, limited evidence suggests that Hungary’s taxes on sugar, salt and caffeine above certain thresholds and Mexico’s tax on sugar-sweetened beverages and processed foods have reduced consumption somewhat.

But initial results of Berkeley’s tax shows it has been only partially passed on to consumers. And Denmark repealed its tax on saturated fats after about a year, due to concerns that it was driving consumers to shop in neighboring countries instead.

“It is not possible to offer a blanket assessment of whether taxing unhealthy foods and drinks makes sense,” the authors wrote. “Nutrition policy is complex, involving the interplay of social, cultural, economic and biological factors, uncertainty about the links between nutrition and health, and tradeoffs among numerous policy levers.”

There are several reasons a tax on junk food might not work as intended, the researchers wrote. If consumers reduce their consumption of soft drinks, for example, but instead replace them with equally sugary juices, they may not experience weight-loss benefits. Or if consumers don’t realize they’re paying a tax, it might not change their consumption habits at all.

The most effective types of junk food taxes would be designed in such a way so as consumers substantially reduce their consumption of such foods, are aware of the taxes when they’re making buying decisions and switch to more nutritious diets. Effective taxes need to be folded by businesses into prices rather than absorbed through lower profit margins.

The researchers also stressed that it’s better for policymakers to tax certain ingredients rather than products, in order to reduce the risk that consumers will just substitute one unhealthy item for another. Berkeley’s and Mexico’s taxes on sugar-sweetened beverages, for example, exempt products such as organge juice and beer, which also have high sugar content.

But even if local and state lawmakers pass more junk food taxes, the levies are no substitute for other efforts to help people with obesity lose weight, the researchers warned.

“Taxes are thus an imperfect instrument for addressing nutrition and health concerns,” the wrote. “They may make sense as part of larger policy efforts, particularly to address widespread concerns about excess sugar consumption. But they are no substitute for efforts to identify and help people at the greatest risk from obesity, diabetes, and related conditions.”