ECONOMIC RESEARCH SERVICE
UNITED STATES DEPARTMENT OF AGRICULTURE
Taxing Snack Foods: What to Expect for
Diet and Tax Revenues
Fred Kuchler, Abebayehu Tegene, and J. Michael Harris
Health researchers and health policy advocates have proposed levying excise taxes on snack foods as a
possible way to address the growing prevalence of obesity and overweight in the United States. Some
proposals suggest higher prices alone will change consumers' diets. Others claim that change will be
possible if earmarked taxes are used to fund an information program. This research examines the
potential impact of excise taxes on snack foods, using baseline data from a household survey of food
purchases. To illustrate likely impacts, we examine how much salty snack purchases might be reduced
under varying excise tax rates and possible consumer price responses. We find that relatively low tax
rates of 1 cent per pound and 1 percent of value would not appreciably alter consumption—and, thus,
would have little effect on diet quality or health outcomes—but would generate $40-$100 million in
Obesity, excise tax, price elasticity of demand, snack food
The prevalence of obesity for Americans age 20-74 rose from 15 percent in the late 1970s to 23.3 per-
cent in the late 1980s and to 30.9 percent in 1999-2000 (Flegal et al., 2002).
Increases occurred for
both men and women in all age groups. Similar increases occurred for the share of the population that
is overweight, but not so fat as to be labeled obese. Also, the prevalence of overweight children has
been rising (Ogden et al., 2002).
Overweight children often become overweight adults, and there is
reason to believe the trend toward overweight and obesity among all Americans may continue.
Whether the high and rising prevalence of overweight and obesity is a public or private health problem
is a contentious issue. Many in the public health community say overweight and obesity are public
health problems because so many people suffer from chronic diseases associated with these conditions.
Agriculture Information Bulletin No. 747-08
In population studies, it is common to classify adults as obese, overweight, healthy weight, or underweight. Such classification
uses a measure known as body mass index (BMI), calculated as weight in kilograms divided by height in meters squared. Indi-
viduals are classified as obese when their BMI is greater than or equal to 30. Individuals are classified as overweight, but not
obese, when their BMI is greater than or equal to 25, but less than 30. Healthy weight is less than 25, and greater than or equal
to 18.5. Underweight is less than 18.5.
Children are not classified as obese. Instead, categories are denoted overweight and at risk of being overweight. Body mass
index cutoffs for both categories vary with age and gender.