Latent diffusion models have emerged as the dominant paradigm for many generation tasks including audio generation such as text-to-audio, text-to-music and text-to-speech. A key component of latent diffusion is an autoencoder (VAE) that compresses high-dimensional signals into a low frame rate continuous representation that is conducive for downstream prediction. Regularizing these VAEs is challenging, as there is a trade-off between over-regularized (poor output quality) and under-regularized (difficult to predict) latent representations. We propose a framework for studying this trade-off through compression and train Audio VAEs at specific bitrates via target-KL regularization. This allows direct comparison to well-studied discrete neural audio codec models, and the construction of rate-distortion curves for audio VAEs. We evaluate the impact of target-KL regularization on text-to-sound generation and find that sweeping compression rates is helpful in identifying the optimal generation setting.