A healthy diet is essential to a long and vibrant life. But there is increasing evidence that our diets
are not as healthy as we would like. Obesity, diabetes, hypertension, and other conditions linked
to what we eat and drink are major challenges globally. By some estimates, obesity alone may be
responsible for almost 3 million deaths each year and some $2 trillion in medical costs and lost
productivity (Dobbs et al. 2014). In response, many nations, states, and cities are considering
how policies could improve what we eat and drink.
This report takes a detailed look at one such policy: taxing unhealthy foods and drinks.
Denmark, Finland, France, Hungary, Mexico, the Navajo Nation, and the city of Berkeley,
California, have enacted such taxes, primarily on sugar-sweetened beverages and energy-dense
processed foods (what we commonly call “junk food”). We evaluate the rationale behind such
taxes, review the evidence on their effects, analyze different ways of structuring them, draw
lessons from experience with taxes on tobacco, alcohol, and the carbon dioxide emissions that
cause climate change, and offer a framework for assessing the benefits and costs of nutritionfocused taxation.
It is not possible to offer a blanket assessment of whether taxing unhealthy foods and
drinks makes sense. Nutrition policy is complex, involving the interplay of social, cultural,
economic, and biological factors, uncertainty about the links between nutrition and health, and
tradeoffs among numerous policy levers. Tax policy considerations add more complications.
Taxes can influence what people eat and drink, but they also have important limits and costs.
Whether taxes are a promising option depends on the specifics of the social and economic
environments, the nutritional harms being targeted, the way taxes are designed, and the range of
other policy options available. It also depends on one’s views about the appropriate role of
government.
This report examines a wide range of factors that determine the benefits and costs of
using taxes to improve nutrition. That assessment yields ten findings:
1. Excess sugar consumption stands out as a health risk warranting policy attention. Health
concerns have been raised about, and taxes proposed for, other nutrients and ingredients,
including fat, saturated fat, salt, and artificial sweeteners. But recent research and policy
discussions reveal important disagreements about their health effects. Sugar, in contrast,
is consistently identified as contributing to rising obesity, diabetes, and other metabolic
health risks. Sugar in drinks may be a particular concern.
2. Taxes can change what we eat and drink. Businesses typically pass a substantial fraction
of taxes into retail prices. In response, people eat and drink less of targeted products, less
of complementary products, and more of substitutes. The size of these responses varies.
TAX POLICY CENTER | URBAN INSTITUTE & BROOKINGS INSTITUTION 1
Consumers appear to find it easier to switch away from sugary drinks, which have many
alternatives, than from other foods and drinks.
3. The health effects of nutrition-focused taxes depend on all the ways consumption
changes. It is not sufficient to focus on reduced consumption of targeted products. The
sugar reduction from taxing sweetened drinks, for example, could be partly offset if
consumers switch to juice and beer or eat more bread or cookies. The sugar reduction
could be amplified if people cut back on potato chips and similar snacks that go well with
sugary drinks. Some studies track these effects, typically finding small to moderate
offsets, but more research is needed to document how taxes change entire diets, how
diets change over prolonged periods, and how responses vary across different groups of
people.
