Effects of Taxing Sugar-Sweetened Beverage and Subsidizing Milk: Beverage Consumption, Nutrition, and Obesity among US Children

Taxing sugar-sweetened beverages (SSBs) has been proposed as a means to improve U.S. dietand health and generate revenue to address obesity-related issues. A related concern is thatchildren’s intake of SSBs, a third that of milk consumption in the late 1970s, now equals milkconsumption. Displacing milk by SSBs may shortchange the buildup of bone mass, increasingthe risk of fractures and osteoporosis in later life. Accordingly, we examine the effects that a 20-percent SSB tax and a 20-percent milk price subsidy would have on the diet and health ofAmerican children. We estimated US beverage demand systems and used the estimated demandelasticities to examine the impacts of the hypothetical SSB tax and milk subsidy. Our resultssuggest that a 20-percent tax-induced increase in soda price alone would reduce calorie intakesby 40 calories a day among children, lowering the obesity rate from 16.1 percent to 13.4 percentand the overweight rate from 32 percent to 26.9 percent. When a 20-percent price subsidy formilk is bundled with the SSB tax, children would on average decrease their calorie intake (21calories a day) and increase their calcium intake, but the overweight and obesity rates wouldactually increase by around 2 percent. The seemingly contradiction between the two averages,lower calories and higher obesity, is due to the fact that the majority of children (90 percent)remain unchanged in their weight classification under the price interventions but on averagereduce their calorie intake. Six percent of children increase their calorie intake and gain enoughweight to cross the overweight threshold, whereas four percent of children decrease their calorieintake to improve from being overweight to healthy weight. Therefore, when averaging theeffects of the price interventions, we found a decrease in calorie intake and higher overweightand obesity rates.