The Impact of Soda Taxes: Pass-through, Tax Avoidance, and Nutritional Effects

45 Pages Posted: 27 Dec 2018 Last revised: 14 Mar 2019

See all articles by Stephan Seiler

Stephan Seiler

Stanford Graduate School of Business

Anna Tuchman

Northwestern - Kellogg

Song Yao

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: March 12, 2019

Abstract

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.

Suggested Citation

Seiler, Stephan and Tuchman, Anna and Yao, Song, The Impact of Soda Taxes: Pass-through, Tax Avoidance, and Nutritional Effects (March 12, 2019). Stanford University Graduate School of Business Research Paper No. 19-12. Available at SSRN: https://ssrn.com/abstract=3302335 or http://dx.doi.org/10.2139/ssrn.3302335

Stephan Seiler

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Anna Tuchman

Northwestern - Kellogg ( email )

Kellogg School of Management
2001 Sheridan Rd.
Evanston, IL 60208
United States

Song Yao (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 19th Avenue South
Suite 3-150
Minneapolis, MN 55455
United States

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