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Taxing Sweets: Sweetener Input Tax or Final Consumption Tax?

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In order to reduce obesity and associated costs, policymakers are considering various policies, including taxes, to change consumers' high-calorie consumption habits. We investigate two tax policies aimed at reducing added sweetener consumption. Both a consumption tax on sweet goods and a sweetener input tax can reach the same policy target of reducing added sweetener consumption. Both tax instruments are regressive, but the associated surplus losses are limited. The tax on sweetener inputs targets sweeteners directly and causes about five times less surplus loss than the final consumption tax. Previous analyses have overlooked this important point.

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Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 10-wp510.

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Date of creation: Jul 2010
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Handle: RePEc:ias:cpaper:10-wp510

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Keywords: added sweeteners; consumption tax; demand; health policy; soda tax; sugar.;

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Cited by:
  1. Bonnet, Céline & Réquillart, Vincent, 2011. "Tax incidence with strategic firms on the soft drink market," TSE Working Papers, Toulouse School of Economics (TSE) 11-233, Toulouse School of Economics (TSE), revised Jul 2012.
  2. Miao, Zhen & Beghin, John C. & Jensen, Helen H., 2011. "Accounting for Product Substitution in the Analysis of Food Taxes Targeting Obesity," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania, Agricultural and Applied Economics Association 103320, Agricultural and Applied Economics Association.
  3. Beghin, John C. & Elobeid, Amani, 2013. "The Impact of the U.S. Sugar Program Redux," Staff General Research Papers, Iowa State University, Department of Economics 36172, Iowa State University, Department of Economics.
  4. Abigail M. Okrent & Julian M. Alston, 2012. "The Effects of Farm Commodity and Retail Food Policies on Obesity and Economic Welfare in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 94(3), pages 611-646.

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