Do soda taxes succeed in reducing consumption among lower-income households?
Yes, according to new research from the University of Washington: which finds that taxes on sugar-sweetened beverages reduces purchases of soda by nearly 50%. What’s more, the results suggest that soda taxes could be effective at reducing health disparities, given that sugary drinks contribute to health issues such as obesity and Type 2 diabetes.
A research team looked at the purchasing behavior of around 400 households in Seattle, San Francisco, Oakland and Philadelphia – towns which have all introduced soda taxes.
They found that – after taxes were introduced – lower-income households decreased purchases of sweetened beverages by nearly 50%, while higher-income households reduced purchases by 18%.
Healthier outcomes
Soda frequently comes under fire because sweetened beverages are one of the largest sources of sugar in the American diet. And they typically provide very little in terms of nutritional value, simply serving as ‘empty calories’.
In the US, sugary-beverage intake is higher among adults with low incomes, according to the CDC. And soda consumption is associated with less healthy behaviors: such as smoking, eating fast food often, lack of exercise and more.
Soda taxes seek to reduce consumption of sugar-sweetened beverages by making them more expensive, with lower-income consumers less likely to be able to absorb the impact.
As Melissa Knox, co-author and UW associate teaching professor of economics, explains: “The idea with the tax is that lower-income people, because they reduce their intake more, receive greater health benefits than the higher-income households.”
In the US, soda taxes are levied locally. Since 2015, Boulder, Colorado; The District of Columbia; Philadelphia, Pennsylvania; Seattle, Washington; and four California cities (Albany, Berkeley, Oakland and San Francisco) have implemented soda taxes.
But their introduction is rarely straightforward: and other jurisdictions have tried and failed to introduce them: such as Santa Fe.
Santa Cruz is set to vote on a sugar-sweetened beverage tax next month.
Knox and her team used Nielsen Consumer Panel data, following households for a year before and after soda taxes were implemented in their city.
After the tax was implemented, lower-income households saw a 47% decline in purchases of sweetened beverages. Furthermore, researchers found no evidence of an increase in cross-border shopping (where consumers simply shop outside the area of the soda tax to avoid paying extra).
And perhaps most importantly, the researchers found that consumers gravitated to healthier beverage choices.
“We found that lower-income households are substituting [soda] with untaxed beverages,” Knox said. “They’re using some of their money to go buy a different beverage, rather than buying a candy bar instead of buying a Coke.”
Previous research from the UW found that lower-income and higher-income households paid about the same amount toward the tax, which means lower-income households spent a higher proportion of their income.
However, proceeds from sugar taxes also often go towards funding programs that benefit lower-income communities. So that means the annual net benefit to lower-income communities ranged from $5.3m to $16.4m per year across three U.S. cities.
UW researchers have also found the tax was also associated with declines in childhood body mass index among children in Seattle compared to a well-matched comparison group.
The research was funded by the UW’s Royalty Research Fund and the Robert Wood Johnson Foundation. Support was also provided by a Eunice Kennedy Shriver National Institute of Child Health and Human Development research infrastructure grant.
Source: 'Consumption responses to sweetened beverage taxes by household income in four U.S. cities'. Melissa A. Knox, Jessica C. Jones-Smith. Health Economics, September 30, 2024. https://doi.org/10.1002/hec.4905
