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Abstract
Taxing sugar-sweetened beverages (SSBs) has been proposed as a means to improve U.S. diet
and health and generate revenue to address obesity-related issues. A related concern is that
children’s intake of SSBs, a third that of milk consumption in the late 1970s, now equals milk
consumption. Displacing milk by SSBs may shortchange the buildup of bone mass, increasing
the risk of fractures and osteoporosis in later life. Accordingly, we examine the effects that a 20-
percent SSB tax and a 20-percent milk price subsidy would have on the diet and health of
American children. We estimated US beverage demand systems and used the estimated demand
elasticities to examine the impacts of the hypothetical SSB tax and milk subsidy. Our results
suggest that a 20-percent tax-induced increase in soda price alone would reduce calorie intakes
by 40 calories a day among children, lowering the obesity rate from 16.1 percent to 13.4 percent
and the overweight rate from 32 percent to 26.9 percent. When a 20-percent price subsidy for
milk is bundled with the SSB tax, children would on average decrease their calorie intake (21
calories a day) and increase their calcium intake, but the overweight and obesity rates would
actually increase by around 2 percent. The seemingly contradiction between the two averages,
lower calories and higher obesity, is due to the fact that the majority of children (90 percent)
remain unchanged in their weight classification under the price interventions but on average
reduce their calorie intake. Six percent of children increase their calorie intake and gain enough
weight to cross the overweight threshold, whereas four percent of children decrease their calorie
intake to improve from being overweight to healthy weight. Therefore, when averaging the
effects of the price interventions, we found a decrease in calorie intake and higher overweight
and obesity rates.