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The Impact of Soda Taxes: Pass-Through, Tax Avoidance, and Nutritional Effects

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Listed:
  • Seiler, Stephan

    (Stanford University)

  • Tuchman, Anna

    (Northwestern University)

  • Yao, Song

    (University of Minnesota)

Abstract

We analyze the impact of a tax on sweetened beverages, often referred to as a “soda tax,†using a unique data set of prices, quantities sold, and nutritional information across several thousand taxed and untaxed beverages for a large set of stores in Philadelphia and its surrounding area. We find that the tax is passed through at an average rate of 97%, leading to a 34% price increase. Demand in the taxed area decreases by 46% in response to the tax. There is no significant substitution to untaxed beverages (water and natural juices), but there is a large amount of cross-shopping to stores outside of Philadelphia. After taking into account cross-shopping, the total demand reduction is equal to only 22%. We do not detect a significant reduction in calorie and sugar intake.

Suggested Citation

  • Seiler, Stephan & Tuchman, Anna & Yao, Song, 2019. "The Impact of Soda Taxes: Pass-Through, Tax Avoidance, and Nutritional Effects," Research Papers 3752, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3752
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    Citations

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    Cited by:

    1. Lee, Yunkyung & Giannakas, Konstantinos, 2021. "Market and Welfare Effects on the U.S. Nationwide Sugar-Sweetened Beverages Tax," 2021 Conference, August 17-31, 2021, Virtual 315203, International Association of Agricultural Economists.
    2. John Cawley & David Frisvold & David Jones, 2020. "The impact of sugar‐sweetened beverage taxes on purchases: Evidence from four city‐level taxes in the United States," Health Economics, John Wiley & Sons, Ltd., vol. 29(10), pages 1289-1306, October.
    3. Hunt Allcott & Benjamin B. Lockwood & Dmitry Taubinsky, 2019. "Should We Tax Sugar-Sweetened Beverages? An Overview of Theory and Evidence," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 202-227, Summer.
    4. Yichen Zhong & Amy H. Auchincloss & Brian K. Lee & Ryan M. McKenna & Brent A. Langellier, 2021. "Reply to Vale et al. Comment on “Zhong et al. Sugar-Sweetened and Diet Beverage Consumption in Philadelphia One Year after the Beverage Tax. Int. J. Environ. Res. Public Health 2020, 17 , 1336”," IJERPH, MDPI, vol. 18(20), pages 1-2, October.
    5. Schmacker, Renke & Smed, Sinne, 2020. "Do prices and purchases respond similarly to soft drink tax increases and cuts?," Economics & Human Biology, Elsevier, vol. 37(C).
    6. Renke Schmacker & Sinne Smed, 2023. "Sin Taxes and Self-Control," American Economic Journal: Economic Policy, American Economic Association, vol. 15(3), pages 1-34, August.
    7. Lee, Yunkyung & Giannakas, Konstantinos, 2020. "System-wide market and welfare effects of a U.S. sugar-sweetened beverages tax," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304297, Agricultural and Applied Economics Association.
    8. Cengiz, Ezgi & Cengiz, Doruk, 2020. "The Impacts of Soda Taxes in U.S. Localities," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304351, Agricultural and Applied Economics Association.
    9. Aguilar, Arturo & Gutierrez, Emilio & Seira, Enrique, 2021. "The effectiveness of sin food taxes: Evidence from Mexico," Journal of Health Economics, Elsevier, vol. 77(C).
    10. Neuhofer, Zachary & McFadden, Brandon R. & Rihn, Alicia & Wei, Xuan & Khachatryan, Hayk & House, Lisa, 2020. "Can the updated nutrition facts label decrease sugar-sweetened beverage consumption?," Economics & Human Biology, Elsevier, vol. 37(C).
    11. Gonçalves, Judite & Pereira dos Santos, João, 2020. "Brown sugar, how come you taste so good? The impact of a soda tax on prices and consumption," Social Science & Medicine, Elsevier, vol. 264(C).
    12. O'Connell, Martin & Smith, Kate, 2020. "Corrective Tax Design and Market Power," CEPR Discussion Papers 14582, C.E.P.R. Discussion Papers.
    13. Jorge Alé-Chilet & Sarah Moshary, 2022. "Beyond Consumer Switching: Supply Responses to Food Packaging and Advertising Regulations," Marketing Science, INFORMS, vol. 41(2), pages 243-270, March.

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