Soda taxes

There is strong evidence that soda taxes decrease consumption of soda and other sugar sweetened beverages (SSB), although some current tax levels are generally too low to significantly affect consumer behavior (Afshin 2017, Falbe 2016, Niebylski 2015, AHA-Mozaffarian 2012, Novak 2011, Finkelstein 2013, Dharmasena 2012). Soda taxes increase the price of beverages for consumers (Cawley 2015, Cawley 2016); taxes that change the relative prices of healthy and unhealthy foods have been shown to affect both consumption patterns and obesity levels (Eyles 2012, Urban-Engelhard 2009).

There is a 7% reduction in SSB consumption for every 10% increase in the price of SSB from soda taxes (Afshin 2017). Lower soda sales tax levels, typically no more than 4% of purchase price, may not substantially reduce overall consumption (Sturm 2010) but may benefit at-risk children through the investment of tax revenue on obesity prevention services (Sturm 2010) with a small effect on adults’ weight (Fletcher 2010a). Existing soda taxes do not appear to be associated with adolescent body mass index (BMI) (Afshin 2017, Powell 2009).

Higher magnitude effects could occur if taxes were higher than current levels (Powell 2013, Powell 2009, Todd 2010, USDA-Smith 2010, Kuchler 2005a). Following Berkeley’s 2015 implementation of an additional city-level one cent per ounce soda tax (approximately 12 cents per can), SSB consumption decreased 21% and water consumption increased by 63%; in neighboring cities, SSB consumption increased 4% and water consumption increased by 19% (Falbe 2016). Estimates suggest that raising the cost of SSBs by 20% would decrease calorie consumption and result in weight loss (Novak 2011, Finkelstein 2013, Dharmasena 2012, USDA-Smith 2010).

There is mixed evidence on whether soda taxes create a substitution effect, where consumers switch to other high calorie alternatives. Reductions in child and adolescent soda consumption may be offset by increases in consumption of other high calorie drinks, such as milk drinks (Fletcher 2010b, Cawley 2015, Restrepo 2020); though a study specifically looking at such effects in high school students did not find substitutions occurring (Edmondson 2022). A Seattle-based study suggests there was modest substitution of sweets for sodas (Oddo 2021). A study of SSB taxes in Philadelphia indicates that it decreased consumption of sodas but may have increased consumption of other sugary snacks and treats (Lozano-Rojas 2022). Taxes in small geographic areas may have minimal effects on consumption, since consumers can easily purchase SSBs in neighboring areas without such taxes (Cawley 2015).

Soda taxes may be effective in as little as a year post-implementation, a Berkley, C.A.-based study suggests (Silver 2017) and can have long term effects on demand and consumption. A Seattle-based study suggests that there is a permanent reduction in demand two years after the tax was implemented (Powell 2021).

National models estimate a 0.5 cent per ounce soda tax generates $5.8 billion annually in tax revenue (Lin 2011), which could support nutrition initiatives through subsidies for fruits and vegetables (French 2001) or funding for obesity prevention (Kuchler 2005a, Niebylski 2015). A national cost-effectiveness study suggests that a one cent per ounce SSB tax would save $23.6 billion in health care costs over a 10-year period, increase healthy life expectancy, and generate $12.5 billion in annual revenue (Long 2015a); city-level models suggest that a one cent per ounce municipal SSB tax is also cost-effective (CHOICES).

Successful implementation of the tax and pass-through is key to decreasing consumption of sugary beverages. Tax pass-through, or the extent to which SSB prices increase, must be considered as it can influence demand for soda drinks. A study of the four largest U.S. cities with a soda tax suggests that a 1 cent per ounce tax decreased household purchases by about 12% each month (Cawley 2021). Policymakers implementing SSB taxes should consider combining it with a water price reduction to encourage water consumption (Nau 2018). A model-based study on net employment in Illinois and California suggests declines in beverage industry employment due to SSB taxes are likely offset by new employment opportunities (Powell 2014).

Soda taxes are a suggested strategy to reduce disparities in health outcomes, especially related to obesity and sugar consumption.

Price changes may have a greater effect on the purchasing decisions of low income families than higher income families (Rudd-Friedman 2012, Falbe 2016), and youth than adults (AHA-Mozaffarian 2012) as they are more likely to consume sugary beverages. Greater reductions in SSB consumption may lead to more health benefits and larger reductions in obesity rates among low income families (Rudd-Friedman 2012). States can provide tax credits or rebates to low income households to encourage substitutions of healthy beverages for SSBs, which would minimize the regressive income effect of SSB taxes (Cawley 2015, Backholer 2016).

Ananalysis of the prices of sugary drinks in four localities (Cook County, IL, St. Louis, MO, Oakland, CA, and Sacramento, CA) found that SSB prices were lower in areas with majority non-Hispanic Blacks; prices varied by beverage and store types but did not vary by socioeconomic status (Leider 2019). This suggests that soda taxes need to consider the SSB market and local prices in order for them to be effective. A Bay Area, CA study of low-income neighborhoods suggests that Black individuals purchased soda beverages more frequently from corner stores, discount grocery, and chain grocery stores than white individuals; Latinos in the area purchased more frequently from discount grocery stores (Madsen 2019).

Sugar has been a popular commodity throughout history, with the origin of cane sugar estimated to be around 400 B.C. in Asia. As popularity of sugar increased, the knowledge required to grow and harvest it moved westward. By the 1500s, sugar was regarded as a luxury and only available to the wealthy (USDA-Ballinger 1978).

In the U.S., a sugar shortage during World War I created the U.S. quota system that allowed the government to regulate the import and export of sugar through 1974 (Gerber 1976). In 1981, the Farm Bill replaced the quota system that was introduced in 1934, creating the U.S. sugar program. The U.S. sugar program was developed to maintain minimum sugar prices and provide other supports for the U.S. sugar industry (USDA-Sugar and Sweeteners). Because sugar is so widely used in the U.S., the federal government provides subsidies to encourage its overproduction to ensure lower prices (USDA-Sugar and Sweeteners, IN Sugars). Low prices of a former luxury commodity has led to increased consumption (Bosma 2023).

In present day, the obesity epidemic is linked to the American diet and the high content of calories and sugar, especially sugar sweetened beverages (Temple 2022). To combat this epidemic, various strategies have been utilized like soda taxes and nutrition labeling. The USDA proposed updated standards in 2023 to limit added sugars and sodium, in addition to increasing whole grains (NPR-Bustillo 2023a).

• Is there a soda tax in your community? If not, does your state preempt you from having a local soda tax?
• Is the soda tax implemented in your community effective in reducing the purchase and consumption of sugary drinks? How does it need to be altered to be effective?
• What other interventions, such as decreasing the cost of water, could be paired with the soda tax to support positive change?
• Are you seeing substitution effects in your community? Is substitution higher amongst certain population groups (e.g., high school students)? What steps can be taken, or interventions implemented, to reduce the potential for a substitution effect?

As of 2020, 24 states and Washington, D.C. have sales taxes on soda sold in food stores (Tax Foundation-Soda Tax). Some communities are preempted from passing soda taxes (Crosbie 2021, ChangeLab-Soda taxes).

In March 2015, Berkeley, California implemented a penny per ounce tax on sugar sweetened beverages, the first city-level tax in the nation (Berkeley-SSB tax, Cawley 2016). As of 2022, seven additional cities passed SSB taxes: Philadelphia, Pennsylvania passed a 1.5 cent per ounce tax (Philadelphia-Beverage tax); Boulder, Colorado passed a two cent per ounce tax; and one cent per ounce taxes were passed in Cook County, Illinois (Cook County-SSB tax) and four Bay Area cities (San Francisco, Oakland, Berkley, and Albany) (SF Gate-Knight 2016, Barker 2022).

AHA-VFHK toolkits - American Heart Association (AHA). Voices for healthy kids (VFHK): Resources and toolkits.

CDC DNPAO-Data - Centers for Disease Control and Prevention (CDC), Division of Nutrition Physical Activity and Obesity (DNPAO). Nutrition, physical activity and obesity: Data, trends and maps online tool.

ChangeLab-Designing sugary drink taxes - ChangeLab Solutions. Designing sugary drink taxes: A legal & practical guide.

ChangeLab-SSB regulation - ChangeLab Solutions. Sugar-sweetened beverage regulation.

CHOICES - Childhood Obesity Intervention Cost Effectiveness Study (CHOICES). Reversing the obesity epidemic with cost-effective strategies: Publications, briefs, and reports.

Rudd-Resources - UCONN Rudd Center for Food Policy & Obesity. Resources & tools: Publications, reports, databases, and a revenue calculator for sugar-sweetened beverage taxes.

* Journal subscription may be required for access.

Afshin 2017 - Afshin A, Peñalvo JL, Gobbo LD, et al. The prospective impact of food pricing on improving dietary consumption: A systematic review and meta-analysis. PLoS ONE. 2017;12(3):e0172277.

AHA-Mozaffarian 2012 - Mozaffarian, D., Afshin, A., Benowitz, N.L., Bittner, V., Daniels, S.R., Franch, H.A., Jacobs, D.R., Kraus, W.E., Kris-Etherton, P.M., Krummel, D.A., Popkin, B.M., Whitsel, L.P., & Zakai, N.A. (2012). Population approaches to improve diet, physical activity, and smoking habits: A scientific statement from the American Heart Association (AHA). Circulation, 126(12), 1514-1563.

Backholer 2016* - Backholer K, Sarink D, Beauchamp A, et al. The impact of a tax on sugar-sweetened beverages according to socio-economic position: A systematic review of the evidence. Public Health Nutrition. 2016;19(17):3070-3084.

Barker 2022 - Barker AR, Mazzucca S. The impact of sugar-sweetened beverage taxes by household income: A multi-city comparison of Nielsen purchasing data. 2022.

Berkeley-SSB tax - City of Berkeley, CA. Berkeley Municipal Code Chapter 7.72: Sugar-sweetened beverage product distribution tax. Effective January 1, 2015.

Bosma 2023 - Bosma U. How the world got hooked on sugar. TIME. 2023.

BTG-Soda or snack - Bridging the Gap (BTG). Soda/snack taxes.

Cawley 2015* - Cawley J. An economy of scales: A selective review of obesity's economic causes, consequences, and solutions. Journal of Health Economics. 2015;43:244-268.

Cawley 2016* - Cawley J, Frisvold DE. The pass-through of taxes on sugar-sweetened beverages to retail prices: The case of Berkeley, California. Journal of Policy Analysis and Management. 2016.

Cawley 2021* - Cawley J, Crain C, Frisvold D, Jones D. The pass-through of the largest tax on sugar-sweetened beverages: The case of Boulder, Colorado. American Journal of Agricultural Economics. 2021;103(3):987-1005.

ChangeLab-Soda taxes - ChangeLab Solutions. State and local backgrounders.

CHOICES - Childhood Obesity Intervention Cost Effectiveness Study (CHOICES). Reversing the obesity epidemic with cost-effective strategies: Publications, briefs, and reports.

Cook County-SSB tax - Cook County, Illinois. Cook County sweetened beverage tax.

Crosbie 2021 - Crosbie E, Pomeranz JL, Wright KE, Hoeper S, Schmidt L. State preemption: An emerging threat to local sugar-sweetened beverage taxation. American Journal of Public Health. 2021;111(4):677-686.

Dharmasena 2012* - Dharmasena S, Capps O Jr. Intended and unintended consequences of a proposed national tax on sugar-sweetened beverages to combat the U.S. obesity problem. Health Economics. 2012;21(6):669-694.

Edmondson 2022 - Edmondson EK, Shea JA, Gregory EF, et al. Low-income parents’ perceptions of a sweetened beverage tax in Philadelphia. Journal of Nutritional Science. 2022;11:e67.

Eyles 2012 - Eyles H, Ni Mhurchu C, Nghiem N, Blakely T. Food pricing strategies, population diets, and non-communicable disease: A systematic review of simulation studies. PLoS Medicine. 2012;9(12):e1001353.

Falbe 2016* - Falbe J, Thompson HR, Becker CM, et al. Impact of the Berkeley excise tax on sugar-sweetened beverage consumption. American Journal of Public Health. 2016;106(10):1865-1871.

Finkelstein 2013* - Finkelstein EA, Zhen C, Bilger M, et al. Implications of a sugar-sweetened beverage (SSB) tax when substitutions to non-beverage items are considered. Journal of Health Economics. 2013;32(1):219-239.

Fletcher 2010a - Fletcher JM, Frisvold D, Tefft N. Can soft drink taxes reduce population weight? Contemporary Economic Policy. 2010;28(1):23-35.

Fletcher 2010b* - Fletcher JM, Frisvold DE, Tefft N. The effects of soft drink taxes on child and adolescent consumption and weight outcomes. Journal of Public Economics. 2010;94(11-12):967-974.

French 2001* - French SA, Story M, Jeffrey RW. Environmental influences on eating and physical activity. Annual Review of Public Health. 2001;22:309-335.

Gerber 1976 - Gerber D. The United States Sugar Quota Program: A study in the direct congressional control of imports. The Journal of Law & Economics. 1976;19(1):103-147.

Hilyard 2023 - Hilyard H. What items will cost more under Milwaukee's new 2% sales tax increase? WISN 12 News. 2023.

IN Sugars - Indiana Sugars. Why is sugar a government subsidized commodity? 2021.

Kuchler 2005a - Kuchler F, Golan E, Variyan JN, Crutchfield SR. Obesity policy and the law of unintended consequences. Amber Waves. 2005;3(3).

Leider 2019 - Leider J, Powell LM. Sugar-sweetened beverage prices: Variations by beverage, food store, and neighborhood characteristics, 2017. Preventive Medicine Reports. 2019;15:100883.

Lin 2011* - Lin BH, Smith TA, Lee JY, Hall KD. Measuring weight outcomes for obesity intervention strategies: The case of a sugar-sweetened beverage tax. Economics and Human Biology. 2011;9(4):329-341.

Long 2015a - Long MW, Gortmaker SL, Ward ZJ, et al. Cost effectiveness of a sugar-sweetened beverage excise tax in the U.S. American Journal of Preventive Medicine. 2015;49(1):112-123.

Lozano-Rojas 2022 - Lozano-Rojas F, Carlin P. The effect of soda taxes beyond beverages in Philadelphia. Health Economics. 2022;31(11):2381-2410.

Madsen 2019* - Madsen KA, Falbe J, Olgin G, Ibarra-Castro A, Rojas N. Purchasing patterns in low-income neighbourhoods: Implications for studying sugar-sweetened beverage taxes. Public Health Nutrition. 2019;22(10):1807-1814.

Nau 2018 - Nau C, Kumanyika S, Gittelsohn J, et al. Identifying financially sustainable pricing interventions to promote healthier beverage purchases in small neighborhood stores. Preventing Chronic Disease. 2018;15:E12.

Niebylski 2015* - Niebylski ML, Redburn KA, Duhaney T, Campbell NR. Healthy food subsidies and unhealthy food taxation: A systematic review of the evidence. Nutrition. 2015;31:787-795.

Novak 2011* - Novak NL, Brownell KD. Taxation as prevention and as a treatment for obesity: The case of sugar-sweetened beverages. Current Pharmaceutical Design. 2011;17(12):1218-1222.

NPR-Bustillo 2023a - Bustillo X. The USDA wants to limit added sugars and sodium in school meals. National Public Radio (NPR). 2023.

Oddo 2021 - Oddo VM, Leider J, Powell LM. The impact of Seattle’s Sugar-Sweetened Beverage Tax on substitution to sweets and salty snacks. Journal of Nutrition. 2021;151(10):3232-3239.

Philadelphia-Beverage tax - City of Philadelphia, Pennsylvania. Philadelphia beverage tax.

Powell 2009* - Powell LM, Chaloupka FJ. Food prices and obesity: Evidence and policy implications for taxes and subsidies. Millbank Quarterly. 2009;87(1):229-257.

Powell 2013* - Powell LM, Chriqui JF, Khan T, Wada R, Chaloupka FJ. Assessing the potential effectiveness of food and beverage taxes and subsidies for improving public health: A systematic review of prices, demand and body weight outcomes. Obesity Reviews. 2013;14(2):110-128.

Powell 2014* - Powell LM, Wada R, Persky JJ, Chaloupka FJ. Employment impact of sugar-sweetened beverage taxes. American Journal of Public Health. 2014;104(4):672-677.

Powell 2021 - Powell LM, Leider J. Impact of a sugar-sweetened beverage tax two-year post-tax implementation in Seattle, Washington, United States. Journal of Public Health Policy. 2021;42:574-588.

Restrepo 2020* - Restrepo BJ, Cantor JH. The effects of soda taxes on adolescent intake and blood sugar. Health Economics. 2020;29(11):1422-1434.

Rudd-Friedman 2012 - Friedman R, Brownell K. Sugar-sweetened beverage taxes: An updated policy brief. New Haven: Yale Rudd Center for Food Policy & Obesity; 2012.

SF Gate-Knight 2016 - Knight H. S.F., Oakland, Albany voters pass soda tax. SF Gate. November 8, 2016.

Silver 2017 - Silver LD, Ng SW, Ryan-Ibarra S, et al. Changes in prices, sales, consumer spending, and beverage consumption one year after a tax on sugar-sweetened beverages in Berkeley, California, U.S.: A before-and-after study. PLoS Medicine. 2017;14(4):e1002283.

Sturm 2010 - Sturm R, Powell LM, Chriqui JF, Chaloupka FJ. Soda taxes, soft drink consumption, and children’s body mass index. Health Affairs. 2010;29(5):1052-1058.

Tax Foundation-Soda Tax - Tax Foundation. TaxEDU. Soda tax.

Temple 2022 - Temple JA, Ou SR, Reynolds AJ. Closing achievement gaps through preschool-to-third-grade programs. Frontiers in Education. 2022;7.

Todd 2010* - Todd J, Zhen C. Can taxes on calorically sweetened beverages reduce obesity? Choices: The Magazine of Food, Farm and Resource Issues. 2010;25(3).

Urban-Engelhard 2009 - Engelhard C, Garson A, Dorn S. Reducing obesity: Policy strategies from the tobacco wars. Washington, D.C.: Urban Institute; 2009.

USDA-Ballinger 1978 - Ballinger RA. A history of sugar marketing through 1974. Washington, D.C.: U.S. Department of Agriculture (USDA). 1978;(382).

USDA-Smith 2010 - Smith TA, Lin BH, Lee JY. Taxing caloric sweetened beverages: Potential effects on beverage consumption, calorie intake, and obesity. Washington, D.C.: Economic Research Service (ERS), U.S. Department of Agriculture (USDA); 2010: ERR-100.

USDA-Sugar and Sweeteners - U.S. Department of Agriculture (USDA). Sugar & sweetener. Policy.