Taxing drinks based on how much sugar is present could be the most effective way to decrease consumption and nudge the beverage industry to reduce sugar content, according to a report released Monday by the Urban Institute.

The research shows a single-tier tax on sugar content could reduce overall sugar consumption by 25 percent compared to a volume, or per-ounce tax, which would reduce it by 22 percent.

The report, commissioned by the American Heart Association, which is supportive of sugary drink taxes, examined several models comparing drink taxes based on sugar content to those based on volume.

“Policymakers face important trade-offs in designing taxes on sweetened drinks,” said the report, The Pros and Cons of Taxing Sweetened Beverages Based on Sugar Content “The goal of the policy will in part determine the design.”

It concludes: “If policymakers are proposing taxes on sweetened beverages to discourage sugar consumption, they should give close consideration to basing those taxes on sugar content, which is feasible and legal in many jurisdictions. If, however, their primary goal is revenue collection, taxes on drink volume or sales value might be preferred because of their efficiency.”

AHA Chief Executive Officer Nancy Brown said that while the organization believes a tiered tax could be an effective tool, she said the AHA would continue to help localities across the country in their battles to tax sugary drinks, whether based on sugar content or by volume.

Just last month, Chicago’s Cook County passed a budget that includes a penny-per-ounce tax on sugar-added and diet drinks. On Election Day, voters in four cities approved a sugary drink tax, joining Berkeley, California and the Navajo Nation, which earlier had adopted the taxes. The city of Philadelphia, which is facing a challenge from the American Beverage Association on its 1.5-cent tax, is set to begin collections in January. ​

“This report provides new insights for elected officials to consider in their efforts to decrease the health harms of sugary drinks,” Brown said. “A key finding demonstrates that taxing sugary drinks based on sugar content may be an effective approach to achieve better health and expand healthier options.”

It could give industry an incentive to manufacture healthier choices and encourage businesses to sell them, she said.

According to the AHA, the average American consumes 39 pounds of sugar each year from soda and other sugar-sweetened beverages.  Sugar content in drinks can vary. A typical sugar-sweetened soda is about 30 grams, or 7 teaspoons, per 8-ounce serving, according to the Urban Institute report. Meanwhile, a typical sweetened iced tea could have half that much and a typical flavored-water about a third as much.

Tiered taxing already is being done in other countries.

  • In Hungary, sugary drinks are taxed at about 2 cents per liter if they contain more than the equivalent of 19 grams per 8-ounce serving.
  • The United Kingdom in 2018 will start taxing sugary drinks in two tiers. For each 8-ounce serving, the tax would be about .75 of a cent per ounce for drinks with at least 12 grams of sugar and full cent per ounce if they contain 19 grams.
  • South Africa recently announced a tax on sweetened beverages equal to about one-tenth of a cent per gram of added sugar.