Taxing Food and Beverages: Theory, Evidence, and Policy

19 Pages Posted: 15 Apr 2020

See all articles by Yuqing Zheng

Yuqing Zheng

RTI International

Edward W. McLaughlin

Cornell University - School of Applied Economics and Management

Harry M. Kaiser

Cornell University - School of Applied Economics and Management

Date Written: April 2013

Abstract

We developed a theoretical framework to examine the effect of a change in sales or excise tax on food and beverage demand after considering that consumers may have imperfect tax knowledge, are sometimes inattentive to sales tax, may not be informed of a sales tax change, and pay no sales tax on eligible food or beverages if using food stamps. We conducted simulations to assess how much the sales tax elasticity of demand should be adjusted downward from the price elasticity of demand and quantified the advantage of using an excise tax as an anti‐obesity policy.

Keywords: demand, excise tax, food and beverages, imperfect tax knowledge, misperception, sales tax

Suggested Citation

Zheng, Yuqing and McLaughlin, Edward W. and Kaiser, Harry M., Taxing Food and Beverages: Theory, Evidence, and Policy (April 2013). American Journal of Agricultural Economics, Vol. 95, Issue 3, pp. 705-723, 2013, Available at SSRN: https://ssrn.com/abstract=3573046 or http://dx.doi.org/10.1093/ajae/aas138

Yuqing Zheng (Contact Author)

RTI International

PO Box 12194
Washington, DC 20036-3209
United States

Edward W. McLaughlin

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States
607-255-3169 (Phone)
607-255-4776 (Fax)

Harry M. Kaiser

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States
607-255-1598 (Phone)
607-254-4335 (Fax)

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