UMass Amherst Study Weighs Tax vs. Ban on Trans Fats in Microwaveable Popcorn

While some governments have imposed a tax on unhealthy ingredients in processed foods, others have opted for an outright ban. A recent study led by University of Massachusetts Amherst economists sheds new light on how these differing approaches affect consumers, creating a framework that can be used to assess policies aiming to improve eating habits.

Using microwaveable popcorn as a test case, the research found that a 35% tax on partially hydrogenated oil (PHO) and a complete ban of the ingredient, which is the source of added trans fat in foods, yield similar results in reducing trans fat consumption to near zero. However, both policies produce an estimated reduction in overall consumer welfare by 24-26%, in the form of higher prices and smaller product selection.

Debi Prasad Mohapatra, assistant professor of resource economics at UMass Amherst and a co-author of the paper, notes that a 10% tax on PHO can produce meaningful health benefits while cushioning the effects on prices and consumer choice. The research indicates this approach would cut trans fat consumption by 48% with only an 11% decline in consumer welfare.

“We chose to study microwaveable popcorn because it is ubiquitous and can easily be produced with or without PHO, but our model can be used to assess policies to reduce unhealthy ingredients in a range of products—from trans fat in other processed foods to sugar in soft drinks,” Mohapatra says.

The study estimated a model of demand and supply for microwaveable popcorn using household purchasing data from 2013 and 2014 to analyze 104 products from five leading popcorn brands in the United States. Products with PHO as an ingredient accounted for approximately 39% of purchases.

PHO is an inexpensive additive that can improve the taste, texture, cooking performance and shelf life of foods. However, as a source of trans fat, it can contribute to heart disease, stroke and Type 2 diabetes.

In the U.S., the Food and Drug Administration banned artificial trans fat in 2019. Other countries, including Ethiopia and several states in India, have taxed it instead.

“We are not taking a position on whether a PHO tax or ban is better,” adds Christoph Bauner, assistant professor of resource economics at UMass Amherst and study co-author. “We have designed a framework to compare the pros and cons of different policies. It is up to medical experts and policymakers to decide the best course.”

He stresses that the research captures the market effects of curbing PHO, and not the health benefits associated with reducing its use.

Emily Wang, associate professor of resource economics at UMass Amherst, and Nadia Streletskaya, associate professor of applied economics at Oregon State University, are also co-authors on the paper. It is published in the journal Economic Inquiry.