Unintended effects of soda taxes

Soda taxes seem like a sensible tax. Most studies show that soda is not healthy and taxing something that leads to negative health benefits seems like a reasonable policy. A key question, however, is whether soda taxes–more formally known as taxes on sugar sweetened beverages (SSBs)–lead to a reduction in soda consumption and healthier eating habits.

To test this hypothesis, a paper by Lozano-Rojas and Carlin (2022) examines point of sale data from Philadelphia–which instituted a SSB tax in –and neighboring localities. The point of sale data is from Nielsen Retail Scanner Data and the sugar content of each food item comes from each food item’s online nutrition facts. The use a difference-in-difference approach to compare sugar consumption over time in Philadelphia and neighboring localities. Using this approach, they find that:

We find that the increase in sugar purchased from additional sweetened foods inside Philadelphia offsets approximately 19.1% the reduction in sugar purchased from beverages. Furthermore, purchases from additional sugary items in neighboring localities offset up to 18.9% of the change in sugar from SSBs. Combined the reduction offsets between 21.8% and 39.9% of the decrease in sugar purchases from SSBs.

While sugary beverage purchases declined with the SSB tax, sugar intake from sweetened foods rose by 4.3% in Philadelphia and by 3.7% in the neighboring localities. In short, while the SSB was successful in reducing the intake of soda, about one fifth of the benefit is offset by increased purchases of sugar in solid, rather than liquid forms.

You can read the whole article here.