Taxes reduce consumption and usage of the products being targeted, it is just often the case that it isn't reducing consumption among the people being targeted.
As a way to spur consumption of 'healthier' eating, societal food advocates have sought to tax sugary drinks. A paper by RTI International, Duke University and the U.S. Department of Agriculture instead finds that heavier taxes on sodas and juices is simply creating a government subsidy for other unhealthy foods - the reduction in sugary beverages due to a soda tax would likely lead consumers to substitute those calories by increasing their calorie, salt and fat intake from untaxed foods and beverages.
Obesity rates in the United States are about 36 percent for adults and 17 percent for children and adolescents. A previous RTI paper estimated that medical costs associated with obesity could be up to $147 billion per year.
But heavier taxes and more bans reduced smoking, why wouldn't it work with soda?
"Instituting a sugary beverage tax may be an appealing public policy option to curb obesity, but it's not as easy to use taxes to curb obesity as it is with smoking," said Chen Zhen, Ph.D., a research economist at RTI, and the paper's lead author. "Consumers can simply substitute an untaxed high calorie food for a taxed one. And as we know, reducing calories is just one of many ways to promoting healthy eating and reducing nutrition-related chronic disease."
The study also examined differences in purchase behavior between lower and higher income households. Compared to higher income families' purchases, foods and beverages purchased by lower income families tend to be higher in calories, fat and sodium content on average.
"Because lower-income families tend to buy more sugary soft drinks than higher income families, they would more readily reap the health benefits of reduced sugary beverage intake," Zhen said. "However, they would also pay more in beverage taxes, making it a regressive tax."
To conduct the study, researchers used data on household food purchases from the 2006 Nielsen Homescan panel, a large national consumer panel maintained by the Nielsen Company. Families in the panel are provided with a handheld scanner and instructed to scan the Universal Product Code (UPC) of products they purchased at retail outlets, record purchase quantities and coupons used and identify the retailer that the product was purchased from.
Citation: Chen Zhen, Eric A. Finkelstein, James M. Nonnemaker, Shawn A. Karns and Jessica E. Todd, 'Predicting the Effects of Sugar-Sweetened Beverage Taxes on Food and Beverage Demand in a Large Demand System', American Journal of Agricultural Economics, July 29, 2013 doi: 10.1093/ajae/aat049