Increasing sales taxes on sugary foods to promote healthier food choices among grocery store shoppers is unlikely to be effective because many consumers are unaware of the tax differences on food items sold in grocery stores, according to a new study by RTI International and Cornell University.
The study, published in the American Journal of Agricultural Economics, surveyed 483 shoppers in three chain grocery stores in upstate New York State and found that, on average, one-third of all consumers do not know the correct sales tax status of food and beverages. The authors noted that consumers are sometimes inattentive to sales taxes because the tax is added at the register and not reflected in the shelf price, so consumers then did not recognize the impact of increased taxes on items they had previously purchased.
According to researchers who conducted the study, a more effective strategy to promote healthier food choices might be to increase the tax on the production and distribution (i.e., manufacturers, bottlers, wholesalers, retailers, and distributors) of less healthy food. Doing so would help consumers see the increased the shelf price of less healthy items.
"Most consumers do not have the knowledge of varying sales taxes on different grocery items required to better inform their choices," said Yuqing Zheng, Ph.D., a research economist at RTI and the study's leading author. "Although these taxes are effective in raising revenue for states, they are unlikely to be effective in promoting healthy food choices."
As part of the study, researchers conducted a shopping experiment in major national and regional grocery/supermarket chain stores and specialty chain stores in two cities in upstate New York and North Carolina and found that many store receipts used codes to indicate the tax status of items while others did not differentiate between taxable and exempt foods at all. Such practices contribute to lack of awareness of the taxes on individual food items.
- Y. Zheng, E. W. McLaughlin, H. M. Kaiser. Taxing Food and Beverages: Theory, Evidence, and Policy. American Journal of Agricultural Economics, 2012; DOI: 10.1093/ajae/aas138
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