The Pros and Cons of Taxing Sweetened Beverages Based on Sugar Content

Abstract

Governments are starting to use taxes to discourage consumption of sugary drinks. Those taxes typically scale with drink volume. But sugar content varies widely. This report analyses the potential benefits and costs of scaling these taxes to sugar content. Taxes based on sugar content reduce consumption more effectively than taxes on volume. They also encourage businesses to reduce sugar in their products. Broad-based volume or sales taxes on all soft drinks, however, raise revenue more efficiently. Policymakers thus face trade-offs between using these taxes to raise revenue and to discourage sugar consumption.