Can food taxes and subsidies help improve health outcomes?

Globally, millions of deaths each year can be attributed to unhealthy diets, and these numbers are increasing. These deaths are preventable, and one strategy to encourage consumers to make healthier choices is through fiscal policy, such as subsidies or taxes. Examples include taxes on products known to be unhealthy, such as tobacco and alcohol, with the aim of discouraging consumers from purchasing these products.

The World Health Organization (WHO) has recruited a team of researchers from UConn and the University of Illinois at Chicago to assess whether similar policies for food products have an impact on health, in the hope to provide decision-makers around the world with data on the results of these policy measures. . They recently published two articles in the Journal of the American Medical Association, one on economic and health outcomes of food taxes and subsidiesand another focused on tax results on sugary drinks.

One of the challenges researchers have faced is that food taxes are politically difficult and difficult to implement, so there are few examples to pull data from, says UConn Rudd Center for Food Policy and Health Director of Economic Initiatives and Lead Author Tatiana Andreeva. Additionally, Andreyeva explains that these questions are relatively new, and while there is a wealth of data on shopping behaviors, the evidence on diet and health outcomes is less abundant. As a starting point, the researchers focused on data on subsidies and taxes to get a general overview of how these policies can influence consumer behaviors.

Tatiana Andreeva (UConn Rudd Center)

“When we talk about food taxes, we mean a tax on unhealthy foods,” says Andreyeva, an associate professor in the Department of Agricultural and Resource Economics at the College of Agriculture, Health and Natural Resources. “For example, in 2014 Mexico implemented a tax on non-essential energy-dense foods as part of a national strategy to combat obesity. In Denmark, a tax on saturated fat has been repealedso we don’t have a lot of food taxes or policies as evidence of the effectiveness of food taxes, but we do have a lot of sugary drink (SSB) taxes to study.

For subsidies, the idea is that if prices are reduced and healthier foods are more affordable, people will buy more. Andreyeva says it’s easier to find subsidies for fruits and vegetables, and some countries also have subsidies for healthier produce and staple foods to support the nutrition of low-income people.

“As an example, grants have been widely used in the United States to support nutrition, particularly for participants in food assistance programs, such as INSTANTANEOUS. An example is the Double your food dollars program, where SNAP participants can purchase vegetables at farmers’ markets, and for every SNAP profit dollar spent, the shopper receives $2 in produce. It’s a pretty big grant.

For their recent studies, the researchers performed meta-analyses where they assessed peer-reviewed studies published around the world to examine the effect of subsidies and taxes on purchases, prices, consumption, diet and other outcome data available.

“We assessed how fruit and vegetable purchases change in response to fruit and vegetable subsidies and estimated how much consumer demand would change with lower prices due to subsidies,” Andreyeva explains.

The results showed a significant improvement in consumer purchases and demand for fruits and vegetables. In the case of taxes on sugary drinks, sales also drop significantly. Both policy measures worked as expected; however, consumers did not react as drastically to fruit and vegetable price changes as the researchers had expected, Andreyeva says.

Based on the available data, Andreyeva says they have also not seen a significant change in terms of the effect of subsidies on consumption.

“This could be because there aren’t enough studies looking specifically at consumption yet.”

With millions of data points from sales, purchases are easier to analyze, but Andreyeva says consumption – whether purchases are consumed and what the consumer’s health outcomes are – is much harder to measure, because it requires more expensive and time-consuming data collection. and monitoring; for example, through surveys and interviews. Although more intensive, Andreyeva points out that this health-focused data is essential to understanding the health outcomes of these policies.

Plastic soda bottles on white background.  (Drink, drink) Jan. 20, 2021. (Sean Flynn/UConn Photo)
Taxes on sugary drinks have been effective in reducing consumption (Sean Flynn/UConn Photo).

Successful examples of small sales taxes on snacks and sugary drinks in different parts of the United States and Mexico show that these taxes are promising ways to incentivize healthier decisions. The argument that items like sugary drinks aren’t essential makes them easier to tax, Andreyeva says:

“There is no nutritional value in these drinks. Whereas for food, any food you look at has some nutritional value, and it’s much harder to tax. Also, beverage taxes are easier to implement because they target a single industry, whereas if you tax snacks you have a much wider range of businesses that are affected and you get more opposition from more industries.

The need for specific definitions of what is considered healthy or not is demonstrated by the example of Denmark with the saturated fat tax. Andreyeva explains that the measure was quickly repealed due to opposition stemming from the tax’s impact on meat and dairy prices.

Larger taxes are also pushed back more, whereas with smaller taxes, like Connecticut’s 6.35% sales tax on candy and soft drinks, many people don’t know they are paying for it.

Measures such as taxes and subsidies are just one potential strategy that can be implemented to help consumers make better choices. However, there are bigger systemic barriers for those trying to make healthier food choices, Andreyeva says. Even if the prices are low, do people have a grocery store nearby or transportation to get there? Are there any farmers markets nearby? Do consumers have the knowledge, facilities or time to prepare healthy meals?

Although the data shows some increase in sales of healthier foods, the increases may not be as strong due to these additional barriers.

“A big part of the goal of this research is to see the impact on health care costs or whether taxes or subsidies help reduce diabetes or obesity,” says Andreyeva. “Are we seeing that reflected in health care costs? Unfortunately, we don’t see this evidence yet because we haven’t had enough time since subsidies or taxes were put in place. One day, we hope to see when money is spent on grants, we can see savings elsewhere. Hopefully, we will be able to show policy makers the impact of raising taxes or granting subsidies on health.

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