Sugary Beverage Tax Revisited

Welcome back. Do you remember the time I blogged about Berkeley, California’s sugar-sweetened beverage tax (see Taxing Sugary Beverages)?

In short, Berkeley imposed a one-cent per ounce tax on specified sugar-sweetened beverages effective 1 January 2015. Before and after surveys in Berkeley and, for comparison, in Oakland and San Francisco, suggested that taxing sugar-sweetened beverages can be an effective approach to encourage healthier drinking habits. Berkeley residents reported drinking 52% fewer servings of sugar-sweetened beverages and 29% more water; Oakland and San Francisco residents reported drinking about the same number of sugary beverages.

Change in beverage consumption in Berkeley and comparison cities 3 years after Berkeley taxed sugar-sweetened beverages (SSB) (from ajph.aphapublications.org/doi/10.2105/AJPH.2019.304971).

That was the end of the blog post but not the end of the story. While the Berkeley and similar studies showed that taxing sweetened beverages significantly reduces their purchase, the question arose as to whether the taxes place a greater economic burden on lower-income households.

Are Lower-Income Consumers Taking the Hit?
To address that concern, collaborating researchers affiliated with the University of Washington, the University of Pennsylvania and Healthy Food America chose three cities, Philadelphia, San Francisco and Seattle, that had taxed sweetened beverages. For each, they assessed (1) beverage tax spending, stratified by consumer income level and (2) any net transfer of tax revenue toward lower income populations.

Sweetened beverage tax rates (from www.taxpolicycenter.org/briefing-book/how-do-state-and-local-soda-taxes-work).

Annual consumer beverage purchase data at food stores were available for each city through one of two consumer purchase panels, Nielsen’s Homescan Consumer Panel or Numerator’s OmniPanel. The researchers’ final sample included 1,141 households--585, 344 and 212 households in Philadelphia, San Francisco and Seattle, respectively. (A limitation of both panels is that they do not collect beverages purchased from restaurants.)

Analysis of tax revenue allocations was based on the total tax revenues collected for the most recent fiscal year available (Seattle calendar year 2018, San Francisco fiscal year 2020 and Philadelphia fiscal year 2021).

Positive Results
The researchers found that spending on sweetened beverage taxes as a proportion of income was small, but significantly higher for the lowest income group than for the middle- or highest-income group in all three cities. The annual per capita dollar amount that households paid toward the tax, between $5.50 and $31, did not differ by income level.

The researchers also found that sweetened beverage tax revenues were targeted to lower-income households, especially in Philadelphia (70%) compared to Seattle (56%) and San Francisco (55%). In all cities, there was a net transfer of funds from the higher-income to the lower-income population, with more dollars funding programs that benefit lower-income communities than those households paid in taxes. The annual net benefit to lower-income communities ranged from $5.3 to $19.1 million per year across the three U.S. cities.

Philadelphia programs receiving sweetened beverage tax revenue funds (from www.phila.gov/posts/mayor/2017-04-03-philly-beverage-tax-where-the-money-goes/).

Wrap Up
Considering population-level taxes levied together with allocations of tax revenues, the researchers concluded that a sweetened beverage tax may have characteristics of an equitable public policy in addition to being an effective nutrition policy.

Oh, wait. There was more to the Berkeley blog post. Berkeley’s sweetened beverage tax revenue supported local organizations working to encourage healthier behaviors in the community as well as nutrition education and gardening programs in schools.

Thanks for stopping by.

P.S.
Study of sweetened beverage taxes and benefits by household income in Food Policy journal: www.sciencedirect.com/science/article/pii/S0306919222000574#
Article on study on EurekAlert! website: www.eurekalert.org/news-releases/958343