Americans Pay Double for Sugar Than the Rest of the World. Is That Good for Our Health?

Source: carbsfuel.com

Recently, I wrote about America’s weird government-run sugar industry, which saddles us with really high sugar prices. This explains why American food manufacturers use a lot of high fructose corn syrup as a sweetener instead of sugar.

What if this is good?

High quantities of sugar are bad for human health. Too much sugar leads to metabolic syndrome, obesity, type 2 diabetes, and other health challenges. When we have too much of a good, the standard economic remedy is to tax it. The Federal sugar program is a big sugar tax.

Before endorsing such a tax, we need to know how much sugar is too much.

When I go on a long bike ride, I mix powdered glucose and fructose into my water bottle (in a 2:1 ratio) and supplement with sugary gels. I typically consume about 1200 calories of sugar in a three-hour ride, which replaces less than half the calories I burn.

Professional endurance athletes take this to another level. During Stage 19 of last month’s Tour de France, pro cyclist Ben Healy burned 5065 calories (5031kJ) over 5 hours and 22 minutes. He probably took in about 2600 calories of sugars during the race and a bunch more immediately after the finish.

Source: Ben Healy’s Strava account. He is one of the few to post his power and work data publicly.

Athletes like Ben Healy are not consuming too much sugar; it helps give them energy during the race and aids post-race recovery. However, an average person would be in very poor health if they consumed thousands of calories of sugar every day. The American Heart Association recommends that a typical man should consume no more than 150 calories of added sugar per day, which is about half what the average person consumes.

So, how much sugar is too much depends on a person’s activity level.

It also depends on who bears the burden of eating too much sugar. In a free society, people get to consume things that make them happy, as long as they aren’t affecting other people.

There are two broad ways that excess consumption of added sugar affects other people. First, healthcare costs are borne by taxpayers (for government-funded care) and people who pay health-insurance premiums (for privately-funded care). Various studies estimate that drinking an ounce of a sugary drink imposes about a cent of costs on others through increased health-system costs from future disease.

The second way that excess sugars may affect “another person” is to make life worse for your future self. In a series of papers, Hunt Allcott, Benjamin Lockwood, and Dmitry Taubinsky call this an internality. An internality occurs when you do something today that you regret in the future. It is not an internality if you make a calculated decision to drink a Coke today knowing the potential future health consequences are worth it. It is an internality if you drink a Coke because you lack the self control to make the best long-term decision for yourself.

To measure the internality of drinking sugary beverages, Allcott and co-authors study the food purchase decisions of about 20,000 consumers in the Neilsen Homescan dataset. They supplement the data with a survey in which they asked the same people about (i) their nutrition knowledge, (ii) whether they think they drink more sugary beverages than they should, and (iii) how much they like sugary drinks.

Using an econometric model, the authors estimate that the average U.S. household would consume about 31% fewer sugary drinks “if they had the nutrition knowledge of dietitians and nutritionists and no self-control problems”. Then, based on a demand elasticity, they estimate that reducing consumption by 31% would require an a tax of about a cent per ounce.

So, externalities and internalities imply suggest a two cent per ounce tax on sugary drinks — or 24 cents on a can of Coke.

Lots of places have tried this, and the results have been surprisingly good. My colleague Sofia Villas-Boas has studied the effects of these taxes. In one study, Sofia and her co-authors looked at sugary drink taxes in five US cities. These taxes averaged 1.3 cents per ounce, which caused a 33% price increase. Purchases declined by a massive 33%, as shown below.

Source: Kaplan, Scott, et al. "Evaluation of changes in prices and purchases following implementation of sugar-sweetened beverage taxes across the US." JAMA Health Forum. Vol. 5. No. 1. American Medical Association, 2024.

So, it seems sugary drink taxes may work well in improving health and welfare on average. They will be too harsh for endurance athletes and too mild for soda addicts, but about right on average. Does this mean that our wacky Federal sugar policy has been helping us all along?

Answer: not really.

The Federal sugar program effectively places a 100% tax on wholesale sugar prices, which sounds like a lot. But, the cost of sugar makes up a tiny percentage of the price of a sugary drink, so raising the cost of sugar by 100% doesn’t do much to the price of the drink in the store.

Specifically, the sugar program raises wholesale sugar prices by 20c per pound of sugar, which translates to about 1.7 cents per can of Coke (or 0.14c per ounce of Coke). This is about one tenth of the sugary drink taxes that have been implemented, so we would expect one tenth of the effect. That is, the sugar program may have reduced sugary drink consumption by the relatively small amount of 3.3%.

To look at it from a different angle, we saw above that externality and internality cost of consuming a can of Coke is about 24 cents. The world price of the sugar in that can is 1.7 cents. Put these numbers together and the appropriate sugar tax to account for the external and internal costs is 24/1.7 = 1400%. People love sugar so much that it needs a 1400% tax to compensate for the damage it causes, and yet we would still use a lot of it even with the tax.

Addendum: Here’s a NYT article about how much Ben Healy eats during the Tour de France: 6,252 calories and 1,245 grams of carbs: What it takes to fuel a winning ride at the Tour de France