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The impact of the Oakland SSB tax on prices and volume sold: A study of intended and unintended consequences

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  • Pierre Thomas Léger
  • Lisa M. Powell

Abstract

We examine the effects of a sugar‐sweetened beverage (SSB) tax that took effect in Oakland, California in 2017. Using rich customized universal product code ‐level data, we estimate the effect of the SSB tax on prices and volume in the short to medium term in a difference‐in‐differences framework. We pay particular attention to tax‐avoidance strategies that may minimize the policy's intended effect including: (i) transfers to SSBs to the nontaxed border area (i.e., cross‐border shopping), (ii) a move from high‐priced per ounce single serve to their cheaper multipacks or larger format counterparts (i.e., format switching), and (iii) a move from high‐priced beverages to less expensive ones within a category and format (i.e., brand switching). We find that the year‐over‐year tax pass‐through is 49%. We find that volume sold of taxed beverages fell by 14%, but 46% of this decrease is offset with an increase in the border area. We also find evidence of substitution to lower‐priced taxed beverages but no evidence of switching to cheaper formats. Finally, we find important dynamic effects with respect to tax pass‐through, volume sold and cross‐border shopping.

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  • Pierre Thomas Léger & Lisa M. Powell, 2021. "The impact of the Oakland SSB tax on prices and volume sold: A study of intended and unintended consequences," Health Economics, John Wiley & Sons, Ltd., vol. 30(8), pages 1745-1771, August.
    • Handle: RePEc:wly:hlthec:v:30:y:2021:i:8:p:1745-1771
    DOI: 10.1002/hec.4267
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    Cited by:

    1. Leider, Julien & Powell, Lisa M., 2022. "Longer-term impacts of the Oakland, California, sugar-sweetened beverage tax on prices and volume sold at two-years post-tax," Social Science & Medicine, Elsevier, vol. 292(C).
    2. Zhen, Chen & Chen, Yu & Lin, Biing-Hwan & Karns, Shawn & Mancino, Lisa & Ver Ploeg, Michele, 2021. "Do Obese and Nonobese Consumers Respond Differently to Price Changes? Implications of Preference Heterogeneity for Using Food Taxes and Subsidies to Reduce Obesity," MPRA Paper 112697, University Library of Munich, Germany.
    3. He, Xiaoyang & Balagtas, Joseph V., 2022. "Spatial retail competition reduces the effects of soda taxes on price and quantity: Evidence from the Philadelphia Beverage Tax," Food Policy, Elsevier, vol. 112(C).
    4. Chen Zhen & Yu Chen & Biing‐Hwan Lin & Shawn Karns & Lisa Mancino & Michele Ver Ploeg, 2024. "Do obese and nonobese consumers respond differently to price changes? Implications of preference heterogeneity for obesity‐oriented food taxes and subsidies," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(3), pages 1058-1088, May.
    5. Goncalves, Judite & Merenda, Roxanne & Pereira dos Santos, João, 2023. "Not So Sweet: Impacts of a Soda Tax on Producers," IZA Discussion Papers 15968, Institute of Labor Economics (IZA).
    6. Judite Gonçalves & Roxanne Merenda & João Pereira dos Santos, 2024. "Not so sweet: impacts of a soda tax on producers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(5), pages 1388-1412, October.

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