Is Nation’s First Soda Tax Working As Intended? New Study Says Yes

Tax

A new study of Berkeley’s tax on sugary drinks, the first in the nation, suggests that it may be accomplishing its goals. The study was published Tuesday in PLOS Medicine by the Public Health Institute and the University of North Carolina.

“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” is the largest-to-date evaluation of the nation’s first sugar sweetened beverage (SSB) tax, covering 15.5 million supermarket checkouts. It found that the volume of sugar sweetened beverages sold in Berkeley declined significantly, by 9.6 percent, in the year following implementation. Because sales for healthier beverages also rose, including water and milk, there was no negative impact on overall beverage sales at studied local businesses. Overall grocery bills (consumer spending per checkout) did not go up.

“The Berkeley tax is a home run—residents chose healthier options, it raised revenue for promoting health, and we saw no evidence of higher grocery bills for consumers or harm to local business revenue,” said lead author Dr. Lynn Silver of the Oakland-based Public Health Institute. “These findings suggest that sugary drink taxes make health and economic sense.”

Top findings include:

• Purchases of sugary drinks declined: Sales (in ounces per transaction) of taxed SSBs fell by 9.6 percent in Berkeley, while they rose by 6 percent in other Bay Area stores without a tax (compared to predicted sales based on pre-tax trends). Sales of diet soft drinks and diet energy drinks also fell significantly, by 9.2 percent.

• Purchases of healthy beverages increased: Sales of untaxed healthier beverages, already far greater at baseline, rose significantly, by 3.5 percent, and overall beverage sales went up in Berkeley. Sales of water rose by 15.6 percent (more in ounces than the decline in SSBs); untaxed fruit, vegetable or tea drink sales increased by 4.37 percent; and sales of plain milk rose by 0.63 percent (all statistically significant).

• No negative impact on store revenue or consumer grocery bills: Although overall store revenues per transaction in the studied chains dropped slightly across the Bay Area during the study period, store revenues in Berkeley fell by 18 cents less (-$0.36) compared to non-Berkeley stores (-$0.54). This same indicator—store revenue per transaction—is also what consumers spent on average for each checkout or “grocery bill” at the participating stores, indicating that their average grocery checkout bill did not increase at these stores—counter to claims by the soda industry that the policy would be a “grocery tax.”

• Investments in health increased: In spite of low consumption of SSBs, the city’s revenue from the first year of the SSB tax was $1,416,973—or $12 per capita. Funds raised went to nutrition and obesity prevention activities in schools, childcare and other community settings.

• The tax costs were passed through to taxed products in many, but not all, stores: In the 15.5 million transaction study, about two-thirds of the penny-per-ounce levy (0.67 cents/oz.) was passed through to consumers by pricing increases on the taxed drinks. For soda and energy drinks it was fully passed through (1.09 cents/oz.). In the 26 store study, it was fully passed on in large (1.07 cents/oz.) and small chain supermarkets and chain gas stations (1.31 cents/oz.), partially in pharmacies (0.45 cents/oz.), but not in smaller independent corner stores and independent gas stations. Prices on non-taxed beverages did not increase more in Berkeley than in comparison stores.

“Berkeley’s per capita SSB consumption is significantly lower than the country as a whole,” said Shu Wen Ng, Ph.D., University of North Carolina research associate professor of nutrition and co-first author on the study. “This suggests we will see a much larger tax impact in other U.S. cities with similar or higher tax levels.”

The tax, approved by Berkeley voters in November 2014, is a penny-per-fluid-ounce (1 cents/oz.) of sugary drinks, paid by beverage distributors. Revenues from the tax are placed in the general fund and an advisory committee recommends to the city how to spend the resources to improve health.

The study evaluated changes during the first 12 months of implementation (March 2015-February 2016) from three data sources. Data analyzed included: (1) beverage prices at a sample 26 Berkeley stores of varying types; (2) point-of-sale scanner data on beverage prices, sales in ounces and store revenue per transaction on 15.5 million checkouts in three Berkeley and six control non-Berkeley large supermarkets in nearby cities; and (3) a smaller before-and-after representative telephone survey of 957 adult Berkeley residents.

Similar taxes recently were passed in San Francisco, Oakland and Albany, California; Philadelphia, Pennsylvania; Cook County, Illinois; and Boulder, Colorado; as well as other countries, including the U.K. They are under consideration now in Santa Fe, New Mexico; Seattle, Washington; Connecticut; West Virginia; Illinois; Massachusetts; and Washington.

The study was supported by Bloomberg Philanthropies. Data was collected by the Public Health Institute and its Survey Research Group, with the collaboration of local retailers and grocery chains.

About The Author

A former newspaper editor and publisher who has handled digital duties for The Shelby Report since 2011. She once enjoyed leisurely perusing the grocery store aisles but, since having a baby in 2016, is now an enthusiastic click-and-collect shopper.

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