Soda taxes reduce sales in Philadelphia by sending buyers to neighboring areas.
In prior posts, I have been quite skeptical of sin taxes such as sugar or soda taxes. I personally think that they will hurt those who can barely afford them and drive people to buy them elsewhere. I wrote about it in Sugar Tax: Would it decrease obesity? I also believe that it might reduce sales, and that is supported by my article entitled “Soda Taxes Can Change Behavior.” So what does the new research show?
First, let me start this article with the facts. I have no doubt and research has proven that sugar-sweetened beverages are likely bad for your health. Although the artificial flavors and colors are less than ideal, there is no doubt that the ingredient in the beverage that causes the poor health effects is sugar itself. It is absolutely not the water or concoction of other ingredients in the can.
So what about this new research? Let’s start with a review of what Philadelphia did to make a change. They created a beverage excise tax that increased the price of sugar-sweetened beverages. This tax appears to have reduced the amount that was purchased in the city itself. This research is not novel; similar programs were implemented in Mexico and Berkeley, California. Berkeley, to its credit, was the first city in the United States to implement a sugary drink sin tax. Both taxes have been relatively successful, but as indicated in my prior articles, I suspect that they drove sales to neighboring cities and counties.
In Philadelphia, the implementation of the 1.5% per ounce tax reduced the total volume of sugary drink sales across chain retailers in supermarkets, mass merchandisers, and pharmacies by over 50% reduction during the year for the study. So, to a certain extent, the tax was successful. The problem is that sales increased in neighboring zip codes that did not have a tax.
Although proponents would say that this is a success, I disagree. Unless we decide, as a nation to ban all sugar-sweetened products, we will never be able to limit usage. The taxes must hit candy, drinks, cakes, desserts, and coffees. I am very suspicious that these taxes did not tax all sugar-sweetened beverages and foods. If you pick winners and losers with taxes, you drive the sugar-addicted constituents to another product.
Another problem with the tax is that it only applied to any nonalcoholic beverages (Research: Soda taxes may increase alcohol sales). The sugar-based sweetener taxes may not apply to artificial sugar substitutes or alcohol. These artificial sweeteners and alcohol may be worse than sugar, but how would we know without good research. To this day, we have not had great research to back said taxes. Currently, we are reacting base don emotion and not evidence or numbers. Evidence is the key to make good quality decisions.
Based on disclosure: This study was limited because it did not include data on cross-border shopping from New Jersey, non-chain retailers, overall store revenue, or changes in beverage consumption or other health outcomes.
Economists in a recent article found that taxes nationwide would generate nearly 7 billion in revenue. They often quote that these sin taxes are for the better or “net good” of society. The belief is that these taxes would act like the other sin taxes on alcohol and tobacco to decrease the use of said sins and thus increase the health of the nation and at least if it does not, the government in its great wisdom can redistribute that wealth to better uses. By the state of our roads, we can see that gasoline taxes have not reached their intended benefit so I suspect any soda tax will be squandered just the same.
The bottom line: The implementation of a beverage tax on sugar-sweetened and artificially sweetened beverages was associated with significantly higher beverage prices and a significant decline the items sold. This problem is that this decrease in taxed beverage sales volume resulted in an increase in the volume of sales in bordering areas. Prohibition did not work, and alcohol taxes only work when they are nationwide. I am not suggesting this is the right answer if we are going to be a nanny state; it needs to based on better science and not be implemented in such a small area. The belief is that is tax will reduce obesity and diabetes and that concept does not pass the muster, yet.
- C. A. Roberto et al., “Association of a Beverage Tax on Sugar-Sweetened and Artificially Sweetened Beverages With Changes in Beverage Prices and Sales at Chain Retailers in a Large Urban Setting,” JAMA, p. 1799, May 2019 [Online]. Available: http://dx.doi.org/10.1001/jama.2019.4249