PHAI Attorney and Noted University of Illinois Economist Look at Applying Tobacco Taxation and Other Pricing Strategies to Reduce Obesity

University of Illinois, Chicago Economist, Frank J. Chaloupka, and PHAI Senior Staff Attorney, Patricia A. Davidson, have published an article commissioned by the Tobacco Control Legal Consortium that explores the applicability of tobacco control taxation and pricing strategies to obesity prevention.  Key points include:

  1. Tobacco consumption responds to price changes. Higher taxes reduce consumption and prevalence, especially among youth and the poor. Higher taxes also raise government revenue that may be dedicated to tobacco control or other public health initiatives.
  2. Most tax increases are justified on policy and economic grounds.
  3. The legality of tax increases is not generally a significant issue, unlike restrictions on advertising and marketing, which often spark First Amendment commercial speech debates.
  4. The tobacco industry, concerned with long-term profitability, has responded to tax increases with a variety of discounting practices. Tobacco control advocates could respond more aggressively to this strategy by adopting laws to restrict discount tools, such as coupons, multi-pack discounts, and other price discounts, including removing their protection under minimum pricing laws. Although the industry may argue that limits on discounts raise First Amendment issues, this argument should not be persuasive because laws pertaining to pricing and discount practices do not implicate the commercial speech doctrine. Such laws only need to be rationally related to a legitimate public health purpose (e.g., reducing consumption) to withstand a court challenge.
  5. Proposed taxes on sugar-sweetened beverages raise many of the same policy and legal issues as tobacco taxes. The food industry’s arguments against them are also similar to those of the tobacco industry. Tax increases, as well as any laws limiting industry discounting practices, do not implicate the First Amendment and are legally defensible as reasonable measures to reduce consumption.
  6. Higher taxes on sugar-sweetened beverages, at least as a first step, may currently be more politically palatable and justifiable than a potentially difficult to define and administer tax on snack foods.
  7. The successful strategy of dedicating a portion of tax increases to public health programs, including subsidies for healthier options, should be part of the legal policy model for taxing sugar-sweetened beverages or snack foods.