Three essays on tax policies addressing the obesity epidemic and associated calorie intake

Policymakers are considering various policies to reduce obesity and its associated costs, including consumption taxes on high-calorie foods. Essay 1 focuses on two tax schemes targeting sweetener-intensive foods. Both a consumption tax on sweetener-intensive goods and a sweetener input tax can reach the same policy target of reducing added sweetener consumption. Both tax instruments are regressive although the welfare impacts are small. The tax on sweetener inputs leads to loss in consumer surplus only one fifth of that caused by the final consumption tax applied to sweetener-intensive goods. Essay 2 proposed a methodology to account for the ability of consumers to substitute leaner low-fat and low-sugar items for rich food items within the same food group in addition to substitution among food groups. Simulations of taxes on added sugars illustrate how that the impact of the tax on consumption patterns is understated and the effect on welfare loss overstated when abstracting from this substitution within food groups. Essay 3 applies the framework developed in essay 2 to analyze recent tax proposals to tackle obesity, such as using a tax on sodas, sweets, and other sources of added calories. To compare the policies, a basis of equivalence is established in terms of a calorie reduction which corresponds to the calorie reduction induced by a one-cent-per-ounce soda tax proposal. Simulations show that from a welfare perspective, targeting the right food group is more important than the type of tax. Taxes on butter and bakery goods should be targeted to minimize the welfare loss to abate calories. An ad valorem tax on carbonated soft drinks is a good way to raise revenue although its welfare loss is not the lowest one. A proportional tax on all calories applied to all foods has the lowest social cost per dollar of tax revenues but not the most efficient way to reduce calories.