Clever politicians want to know the potential welfare impact of taxation. I said "clever", though this is not always the case. An example of economic modeling for sugar-sweetened beverages to set up the right level of taxation (in India), appears in PLOS Medicine. The summary:
The researchers used survey data relating SSB consumption to price variations to calculate how changes in the price of SSBs affect the demand for SSBs (own-price elasticity) and for other beverages (cross-price elasticity) in India. They combined these elasticities and data on SSB sales trends, BMIs, and diabetes incidence (the frequency of new diabetes cases) into a mathematical microsimulation model to estimate the effect of a 20% tax on SSBs on caloric (energy) consumption, glycemic load (an estimate of how much a food or drink raises blood sugar levels after consumption; low glycemic load diets lower diabetes risk), the prevalence of overweight/obesity, and the incidence of diabetes among Indian subpopulations. According to the model, if SSB sales continue to increase at the current rate, compared to no tax, a 20% SSB tax would reduce overweight/obesity across India by 3.0% and the incidence of type 2 diabetes by 1.6% over the period 2014–2023. In absolute figures, a 20% SSB tax would avert 11.2 million cases of overweight/obesity and 400,000 cases of type 2 diabetes between 2014 and 2023. Notably, if SSB sales increase more steeply as predicted by drinks industry marketing models, the tax would avert 15.8 million cases of overweight/obesity and 600,000 cases of diabetes. Finally, the model predicted that the largest relative effect of an SSB tax would be among young men in rural areas.The results confirm previous studies, 20% may be the ceiling for a tax . But what happens to health?. Assumptions on a fall in consumption, are just that, assumptions. And former behaviour is extrapolated into the future. This is what happens to any model, and this is the uncertainty and courage that any politician must hold in taking a difficult decision. Such moment is closer than before. If you are not convinced, I would suggest you have a look at this documentary released last week:
The documentary is about weight control, but places special emphasis on sugar (addiction). Please have a look at the quantity of sugar in a beverage!!! (14 sugar cubes). Incredible.
PS. "Superbe" post by Reinhardt: How the Medical Establishment Got the Treasury’s Keys
