Partial versus General Equilibrium Calorie and Revenue Effects of a Sugar-Sweetened Beverage Tax

The current obesity crisis in the United States is generating numerous alternative policy options for combating the problem. One alternative that has been widely proposed is an excise or sales tax on sugar-sweetened non-alcoholic beverages. This literature started out within a very simple partial equilibrium framework. Not considering the feedback effects (or general equilibrium effects) across interrelated market is a shortcoming of these partial equilibrium analyses. Our study is carried out to ascertain stochastic partial and general equilibrium calorie, body weight and revenue effects of a tax on sugar-sweetened beverages as well as incidence of such tax. We used Nielsen Homescan data on prices and quantities of selected non-alcoholic beverages purchased over the period January 1998 through December 2008. Probability density functions (pdfs) generated using simulations of calorie outcomes reveal that the calorie reduction due to tax on sugar-sweetened beverages is between 465 and 716 calories per person per month. However, consideration of both direct and indirect effects in generating the effect of the tax on sugar-sweetened beverages reveal reduction as low as 199 calories per person per month and as high as707 calories per person per month.