TAXING SWEETS: SWEETENER INPUT TAX OR FINAL CONSUMPTION TAX?

Policymakers are considering various policies to reduce obesity and its associated costs, including consumption taxes on high-calorie foods and specifically sweetened foods. We investigate two tax policies to reduce added sweetener consumption: a consumption tax on sweetened goods and a sweetener input tax. Both tax instruments can reach the same policy target of reducing added sweetener consumption and are found to be regressive. The tax on sweetener inputs targets sweeteners directly and leads to loss in consumer surplus that is only one fifth of that caused by the final consumption tax. Previous analyses have overlooked this important point.