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 a rate of 75-115%, leading to a 30-40% price increase. Demand in the taxed area decreases dramatically by 42% in response to the tax. There is no significant substitution to untaxed beverages (water and natural juices), but cross-shopping at stores outside of Philadelphia completely offsets the reduction in sales within the taxed area. As a consequence, we find no significant reduction in calorie and sugar intake.
This is exactly what happened in Berkeley, California.
National Review has more...
Poor Philadelphians were hardest hit by the tax because residents with the means to leave the city to make their soda purchases — the well-off — did so. A 42 percent decrease in soda sales within city limits was more than made up for by a large increase in soda sales in stores within two miles outside Philly. And the expected gusher of revenue didn’t quite materialize either, as receipts fell about 15 percent short of projections. “In summary, the tax does not lead to a shift in consumption towards healthier products, it affects low income households more severely, and it is limited in its ability to raise revenue,” the study said.
Five dollars to the first person who spots a 'public health' lobbyist citing this study.
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