CA Town's 'Soda Tax' Drastically Reduced Sugary Drink Consumption, Study Finds

BERKELEY, CA — Taxing sugar is potentially the next big thing in public health policy. So far, only two cities in the United States, Berkeley and Philadelphia, have passed these types of laws (taxes on sugar-sweetened beverages, to be precise), as they remain deeply controversial.

But one source of controversy, the question of whether or not taxing sugary drinks actually reduces consumption, is coming closer to a conclusion. According to a study released this week Berkeley's tax on sugary beverages sharply reduced public consumption of drinks like soda and sports drinks.

The idea behind the policy is simple: if you raise prices on sugary beverages, customers will drink them less. And since sugary drinks are very unhealthy, accounting for as many as 25,000 American deaths a year according to one study, reducing consumption could make the population much better off.

Some critics of these policies have been very skeptical that any reasonable tax would change consumers' behavior; in economics language, they claim that the demand for sugar is "inelastic." But the new study published by the American Journal of Public Health and led Jennifer Falbe, researcher at the School of Public Health at the University of California, Berkeley, found that the city's tax on sugary drinks dented the public's appetite for these high calorie drinks.

While surrounding cities in the Bay Area, which did not adopt the tax, increased their consumption of sugary drinks by 4 percent after the law in Berkeley was passed, Berkeley residents appeared to decrease their consumption of sweetened beverages 21 percent over the same period.

"The reduction was larger than was predicted for the overall population," said Kristine Madsen, one of the authors of the study, "but consistent with what was seen in Mexico among low-income families after their tax was implemented."

The tax itself is an extra 1 cent per ounce on sodas, sports drinks, energy drinks, or juices sweetened with sugar — diet drinks with artificial sweeteners are unaffected. Though the tax is technically paid by the producers, they typically pass at least some of price on to customers. In fact, the study found that 69 percent of the cost of the taxes on sodas, and 47 percent of the extra cost on all affected drinks, was passed on to consumers.

The study relied on survey data taken from street interviews in areas with larger low-income and minority populations because, as the authors note, these groups are most likely to consume sugary drinks and experience the resulting negative health effects.

Madsen noted that this targeting could distort the results.

"It is likely that the impact in low-income communities is greater than what we’ll see in the broader community," she said. "Further studies will be able to address that question specifically. However, any reduction in sugary beverage consumption is a positive move towards a healthier population. If low-income communities are even less likely to buy sugary beverages after a tax, that just means they’ll get healthier faster, and that’s good news."

Many critics of these policies, including former presidential candidate Bernie Sanders, oppose the tax precisely because it imposes disproportionate burden on the poor. Proponents counter that this effect is acceptable, because the health benefits themselves accrue mostly to low-income groups.

A very small percentage of Berkeley respondents, around 5 percent, appear to have switched to purchasing sugary drinks outside the city limits to avoid the tax. As many as 22 percent of respondents reported drinking fewer sugary beverages because of the tax, and water consumption in the city correspondingly rose.

Of course, there are many more questions to ask about these laws.

"We clearly need more studies from other cities implementing taxes in order to understand the full impact of this approach," said Madsen.

Philadelphia is only other city in the United States that has passed such a law, which will take effect in January. Philadelphia's tax is 50 percent higher at 1.5 cents per ounce and applies even to drinks with artificial sweeteners.

Other countries have found success with sugar-targeting taxes, such as Mexico and France, which both passed nationwide measures, as the paper notes. But the Berkeley case deepens our knowledge on the policies' effects, because the city-specific nature of the tax means the researchers were better able to get a sense of the policy's effects by comparisons to nearby municipalities, thus distinguishing the effects of the policy from broader trends.

If other cities do follow the lead of Berkeley and Philadelphia — an outcome this study makes more likely — there's a lot more we could learn about these policies and their effects.

What would Madsen most like to know?

"Understanding how the beverage industry responds to new taxes will be very interesting," she said. "If they move to providing healthier products, there would be no need to tax them."

Photo credit: Yaybiscuits123 via Flickr