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Taxing Snacks to Reduce Obesity
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Salty snacks are an American favorite. Ninety-nine percent
of U.S. households purchased some salty snacks, which include potato
chips, corn chips, pretzels, tortilla chips, cheese puffs, microwave
popcorn, and nuts, in 1999. On average, each U.S. household spent
$76 on 32 pounds of salty snacks. Backers of a proposed tax on snack
foods argue that such a tax will improve diets and health by reducing
consumption.
Selective taxation of particular food items is rare
for the Federal Government. Now, some public health advocates and
health researchers are proposing an excise tax on snack foods as
a way to reduce the prevalence of obesity in the United States.
Three variations on such a tax have emerged, each envisioning a
different pathway toward improving consumers’ diets and health.
A tax imposed on snack foods that is paid by consumers would increase
the price of snack foods and might give consumers an incentive to
cut back on such items. A consumer-paid tax targeted at foods that
contain particular unhealthy food attributes, such as saturated
fat, might encourage food manufacturers to reformulate their products
and offer consumers more healthful alternatives. The third variation
involves earmarking the tax revenue to fund information programs
promoting healthy diets and lifestyles.
Whether such a tax will change consumers’ diets
depends on how big an incentive the tax provides for consumers and
how responsive consumers are to price increases. ERS researchers
used ACNielsen Homescan panel data to examine likely impacts of
taxes on consumers’ dietary choices. Households providing
the data recorded their food purchases from grocery stores and other
retailers using in-home scanners.
| Nearly
all households purchase salty snacks |
| - |
| Snacks |
Share
of households that purchased snacks |
Average
yearly quantity purchased by households that did purchase |
Yearly
expenditure by households that did purchase |
| |
Percent |
Pounds
per
household |
Pounds
per capita |
Dollars |
| Potato
chips |
91.3 |
9.8 |
4.2 |
26.14 |
| All
chips |
95.5 |
16.3 |
7.0 |
41.43 |
| Other
salty snacks 1 |
96.8 |
16.5 |
7.9 |
37.41 |
| All
salty snacks |
99.2 |
31.8 |
14.5 |
76.39 |
1
Includes pretzels, microwave popcorn, cheese puffs, and
nuts.
Source: Tabulations from ACNielsen Homescan panel, 1999. |
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While almost every household purchases some salty
snack foods and would bear the burden of a tax, salty snacks constitute
a minute share of the household budget. For example, the income group
with the highest per capita expenditure on salty snack foods spent
just 0.2 percent of its average $37,500 annual income on salty snacks.
With expenditure shares that small, snack food purchases will probably
decline very little in response to tax-induced price increases.
ERS researchers simulated tax impacts by using different
measures of consumer responsiveness to prices and different tax
rates. Relatively low tax rates of 1 percent and 1 cent per pound
had negligible impacts on purchases of salty snack foods. For these
cases, taxes would not appreciably alter diet quality or health
outcomes. Tax revenues would, however, be positive—approximately
$40 million per year for the 1-cent-per-pound tax and above $100
million for the 1-percent tax.
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This article is drawn from...
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Taxing
Snack Foods: What To Expect for Diet and Tax Revenues,
by Fred Kuchler, Abebayehu Tegene, and J. Michael Harris, AIB-747-08,
USDA/ERS, August 2004.
“Taxing
Snack Foods: Manipulating Diet Quality or Financing Information
Programs?” by Fred Kuchler, Abebayehu Tegene, and J. Michael
Harris, Review of Agricultural Economics, Vol. 27, No.
1, Spring 2005.
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