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The Incidence of Taxes on Sugar-Sweetened Beverages: The Case of Berkeley, California

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  • John Cawley
  • David Frisvold

Abstract

Obesity and diet-related chronic disease are increasing problems worldwide. In response, many governments have enacted or are considering taxes on energy-dense foods. Perhaps the most commonly-recommended policy is a tax on sugar-sweetened beverages (SSBs). This paper estimates the extent to which a tax on SSBs is passed through to consumers in the form of higher prices. We examine the first city-level tax on SSBs in the U.S., which was enacted by the voters of Berkeley, California in November, 2014. We collected the prices of various brands and sizes of SSBs and other beverages before and after the implementation of the tax from a near-census of convenience stores and supermarkets in Berkeley, California. We also collected prices from stores in a control city: San Francisco, where in a similar voter referendum failed despite majority support. Estimates from difference-in-differences models indicate that, across all brands and sizes of products examined, 43.1 percent (95 percent confidence interval: 27.7 percent - 58.4 percent) of the Berkeley tax was passed on to consumers. The estimates also are consistent with cross-border shopping. For each mile of distance between the store and the closest store selling untaxed SSBs, pass-through rose 33.3 percent for 2-liter bottles and 25.8 percent for 12-packs of 12-ounce cans.

Suggested Citation

  • John Cawley & David Frisvold, 2015. "The Incidence of Taxes on Sugar-Sweetened Beverages: The Case of Berkeley, California," NBER Working Papers 21465, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21465
    Note: CH EH LE PE
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    Cited by:

    1. Abay, Kibrom A. & Ibrahim, Hosam & Breisinger, Clemens, 2022. "Food policies and obesity in low- and middle-income countries," World Development, Elsevier, vol. 151(C).
    2. Daniel John Zizzo & Melanie Parravano & Ryota Nakamura & Suzanna Forwood & Marc Suhrcke, 2021. "The impact of taxation and signposting on diet: an online field study with breakfast cereals and soft drinks," Experimental Economics, Springer;Economic Science Association, vol. 24(4), pages 1294-1324, December.
    3. Fischer, Stefanie & Royer, Heather & White, Corey, 2018. "The impacts of reduced access to abortion and family planning services on abortions, births, and contraceptive purchases," Journal of Public Economics, Elsevier, vol. 167(C), pages 43-68.
    4. Xiang, Di & Zhan, Lue & Bordignon, Massimo, 2020. "A reconsideration of the sugar sweetened beverage tax in a household production model," Food Policy, Elsevier, vol. 95(C).
    5. Rebecca L. C. Taylor & Scott Kaplan & Sofia B. Villas‐Boas & Kevin Jung, 2019. "Soda Wars: The Effect Of A Soda Tax Election On University Beverage Sales," Economic Inquiry, Western Economic Association International, vol. 57(3), pages 1480-1496, July.
    6. Raymundo M. Campos-Vázquez & Eduardo M. Medina-Cortina, 2019. "Pass-through and competition: the impact of soft drink taxes as seen through Mexican supermarkets," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-23, December.
    7. Zhang, Yinjunjie & Palma, Marco A., 2018. "Revisiting the Effects of Sugar Tax on Demand Elasticities - Evidence from the BLP Demand Model," 2018 Annual Meeting, August 5-7, Washington, D.C. 273978, Agricultural and Applied Economics Association.
    8. Massimo Bordignon & Di Xiang & Lue Zhan, 2018. "Predicting the Effects of a Sugar Sweetened Beverage Tax in a Household Production Model," DISCE - Working Papers del Dipartimento di Economia e Finanza def075, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    9. He, Xiaoyang & Balagtas, Joseph V., 2022. "Spatial retail competition reduces the effects of soda taxes on price and quantity: Evidence from the Philadelphia Beverage Tax," Food Policy, Elsevier, vol. 112(C).
    10. Øyvind Thomassen & Howard Smith & Stephan Seiler & Pasquale Schiraldi, 2017. "Multi-category Competition and Market Power: A Model of Supermarket Pricing," American Economic Review, American Economic Association, vol. 107(8), pages 2308-2351, August.
    11. Brett Hollenbeck & Kosuke Uetake, 2021. "Taxation and market power in the legal marijuana industry," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 559-595, September.
    12. Just, David R. & Gabrielyan, Gnel, 2018. "Influencing the food choices of SNAP consumers: Lessons from economics, psychology and marketing," Food Policy, Elsevier, vol. 79(C), pages 309-317.
    13. Adu, Derick T. & Li, Wenying & Sawadgo, Wendiam P.M., 2023. "Estimating the unintended impact of the North American free trade agreement on U.S. public health," Social Science & Medicine, Elsevier, vol. 333(C).
    14. J Lennert Veerman & Gary Sacks & Nicole Antonopoulos & Jane Martin, 2016. "The Impact of a Tax on Sugar-Sweetened Beverages on Health and Health Care Costs: A Modelling Study," PLOS ONE, Public Library of Science, vol. 11(4), pages 1-10, April.
    15. Taylor, Rebecca & Kaplan, Scott & Villas-Boas, Sofia B & Jung, Kevin, 2016. "Soda Wars: Effect of a Soda Tax Election on Soda Purchases," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt0q18s7b7, Department of Agricultural & Resource Economics, UC Berkeley.
    16. Ariane Kehlbacher & Richard Tiffin & Adam Briggs & Mike Berners-Lee & Peter Scarborough, 2016. "The distributional and nutritional impacts and mitigation potential of emission-based food taxes in the UK," Climatic Change, Springer, vol. 137(1), pages 121-141, July.
    17. Joselin Segovia & Mercy Orellana & Juan Pablo Sarmiento & Darwin Carchi, 2020. "The effects of taxing sugar-sweetened beverages in Ecuador: An analysis across different income and consumption groups," PLOS ONE, Public Library of Science, vol. 15(10), pages 1-18, October.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • I1 - Health, Education, and Welfare - - Health
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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