The Impact of Soda Taxes: Pass-through, Tax Avoidance, and Nutritional Effects
45 Pages Posted: 27 Dec 2018 Last revised: 14 Mar 2019
Date Written: March 12, 2019
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.
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