Soda taxes
States and municipalities can add an excise tax or a sales tax to the current price of soda, fruit drinks, energy drinks, tea or coffee drinks, sports drinks, or other sugar sweetened beverages to increase the price of those beverages1. An excise tax charges a fee per ounce; for example, a 1 cent excise tax on a 20-ounce soda bottle is 20 cents. A sales tax charges a percentage of the product’s price; when a 20-ounce soda bottle costs $2.00, a 4% sales tax is 8 cents. Funds generated by the tax may be used to subsidize healthy foods or to support other public health initiatives such as obesity prevention programs. Soda taxes are sometimes called sugar sweetened beverage taxes.
What could this strategy improve?
Expected Benefits
Our evidence rating is based on the likelihood of achieving these outcomes:
Reduced sweetened beverage consumption
Potential Benefits
Our evidence rating is not based on these outcomes, but these benefits may also be possible:
Improved weight status
Reduced obesity rates
What does the research say about effectiveness?
There is strong evidence that soda taxes decrease consumption of soda and other sugar sweetened beverages (SSB), although some current tax levels are generally too low to significantly affect consumer behavior2, 3, 4, 5, 6, 7, 8. Soda taxes increase the price of beverages for consumers9, 10; taxes that change the relative prices of healthy and unhealthy foods have been shown to affect both consumption patterns and obesity levels11, 12.
There is a 7% reduction in SSB consumption for every 10% increase in the price of SSB from soda taxes2. Lower soda sales tax levels, typically no more than 4% of purchase price, may not substantially reduce overall consumption13 but may benefit at-risk children through the investment of tax revenue on obesity prevention services13 with a small effect on adults’ weight14. Existing soda taxes do not appear to be associated with adolescent body mass index (BMI)2, 15.
Higher magnitude effects could occur if taxes were higher than current levels15, 16, 17, 18, 19. Following Berkeley’s 2015 implementation of an additional city-level one cent per ounce soda tax (approximately 12 cents per can), SSB consumption decreased 21% and water consumption increased by 63%; in neighboring cities, SSB consumption increased 4% and water consumption increased by 19%3. Estimates suggest that raising the cost of SSBs by 20% would decrease calorie consumption and result in weight loss6, 7, 8, 18.
There is mixed evidence on whether soda taxes create a substitution effect, where consumers switch to other high calorie alternatives. Reductions in child and adolescent soda consumption may be offset by increases in consumption of other high calorie drinks, such as milk drinks9, 20, 21; though a study specifically looking at such effects in high school students did not find substitutions occurring22. A Seattle-based study suggests there was modest substitution of sweets for sodas23. A study of SSB taxes in Philadelphia indicates that it decreased consumption of sodas but may have increased consumption of other sugary snacks and treats24. Taxes in small geographic areas may have minimal effects on consumption, since consumers can easily purchase SSBs in neighboring areas without such taxes9.
Soda taxes may be effective in as little as a year post-implementation, a Berkley, C.A.-based study suggests25 and can have long term effects on demand and consumption. A Seattle-based study suggests that there is a permanent reduction in demand two years after the tax was implemented26.
National models estimate a 0.5 cent per ounce soda tax generates $5.8 billion annually in tax revenue27, which could support nutrition initiatives through subsidies for fruits and vegetables28 or funding for obesity prevention4, 19. A national cost-effectiveness study suggests that a one cent per ounce SSB tax would save $23.6 billion in health care costs over a 10-year period, increase healthy life expectancy, and generate $12.5 billion in annual revenue29; city-level models suggest that a one cent per ounce municipal SSB tax is also cost-effective30.
Successful implementation of the tax and pass-through is key to decreasing consumption of sugary beverages. Tax pass-through, or the extent to which SSB prices increase, must be considered as it can influence demand for soda drinks. A study of the four largest U.S. cities with a soda tax suggests that a 1 cent per ounce tax decreased household purchases by about 12% each month31. Policymakers implementing SSB taxes should consider combining it with a water price reduction to encourage water consumption32. A model-based study on net employment in Illinois and California suggests declines in beverage industry employment due to SSB taxes are likely offset by new employment opportunities33.
How could this strategy advance health equity? This strategy is rated potential to decrease disparities: suggested by expert opinion.
Soda taxes are a suggested strategy to reduce disparities in health outcomes, especially related to obesity and sugar consumption.
Price changes may have a greater effect on the purchasing decisions of low income families than higher income families3, 41, and youth than adults5 as they are more likely to consume sugary beverages. Greater reductions in SSB consumption may lead to more health benefits and larger reductions in obesity rates among low income families41. States can provide tax credits or rebates to low income households to encourage substitutions of healthy beverages for SSBs, which would minimize the regressive income effect of SSB taxes9, 42.
Ananalysis of the prices of sugary drinks in four localities (Cook County, IL, St. Louis, MO, Oakland, CA, and Sacramento, CA) found that SSB prices were lower in areas with majority non-Hispanic Blacks; prices varied by beverage and store types but did not vary by socioeconomic status43. This suggests that soda taxes need to consider the SSB market and local prices in order for them to be effective. A Bay Area, CA study of low-income neighborhoods suggests that Black individuals purchased soda beverages more frequently from corner stores, discount grocery, and chain grocery stores than white individuals; Latinos in the area purchased more frequently from discount grocery stores44.
What is the relevant historical background?
Sugar has been a popular commodity throughout history, with the origin of cane sugar estimated to be around 400 B.C. in Asia. As popularity of sugar increased, the knowledge required to grow and harvest it moved westward. By the 1500s, sugar was regarded as a luxury and only available to the wealthy45.
In the U.S., a sugar shortage during World War I created the U.S. quota system that allowed the government to regulate the import and export of sugar through 197446. In 1981, the Farm Bill replaced the quota system that was introduced in 1934, creating the U.S. sugar program. The U.S. sugar program was developed to maintain minimum sugar prices and provide other supports for the U.S. sugar industry47. Because sugar is so widely used in the U.S., the federal government provides subsidies to encourage its overproduction to ensure lower prices47, 48. Low prices of a former luxury commodity has led to increased consumption49.
In present day, the obesity epidemic is linked to the American diet and the high content of calories and sugar, especially sugar sweetened beverages50. To combat this epidemic, various strategies have been utilized like soda taxes and nutrition labeling. The USDA proposed updated standards in 2023 to limit added sugars and sodium, in addition to increasing whole grains51.
Equity Considerations
- Is there a soda tax in your community? If not, does your state preempt you from having a local soda tax?
- Is the soda tax implemented in your community effective in reducing the purchase and consumption of sugary drinks? How does it need to be altered to be effective?
- What other interventions, such as decreasing the cost of water, could be paired with the soda tax to support positive change?
- Are you seeing substitution effects in your community? Is substitution higher amongst certain population groups (e.g., high school students)? What steps can be taken, or interventions implemented, to reduce the potential for a substitution effect?
Implementation Examples
As of 2020, 24 states and Washington, D.C. have sales taxes on soda sold in food stores34. Some communities are preempted from passing soda taxes1, 35.
In March 2015, Berkeley, California implemented a penny per ounce tax on sugar sweetened beverages, the first city-level tax in the nation10, 36. As of 2022, seven additional cities passed SSB taxes: Philadelphia, Pennsylvania passed a 1.5 cent per ounce tax37; Boulder, Colorado passed a two cent per ounce tax; and one cent per ounce taxes were passed in Cook County, Illinois38 and four Bay Area cities (San Francisco, Oakland, Berkley, and Albany)39, 40.
Implementation Resources
‡ Resources with a focus on equity.
ChangeLab-Designing sugary drink taxes - ChangeLab Solutions. Designing sugary drink taxes: A legal & practical guide.
ChangeLab-SSB regulation - ChangeLab Solutions. Sugar-sweetened beverage regulation.
Rudd-Resources - UCONN Rudd Center for Food Policy & Obesity. Resources & tools: Publications, reports, databases, and a revenue calculator for sugar-sweetened beverage taxes.
AHA-VFHK toolkits - American Heart Association (AHA). Voices for healthy kids (VFHK): Resources and toolkits.
CDC DNPAO-Data - Centers for Disease Control and Prevention (CDC), Division of Nutrition Physical Activity and Obesity (DNPAO). Nutrition, physical activity and obesity: Data, trends and maps online tool.
CHOICES - Childhood Obesity Intervention Cost Effectiveness Study (CHOICES). Reversing the obesity epidemic with cost-effective strategies: Publications, briefs, and reports.
Footnotes
* Journal subscription may be required for access.
1 ChangeLab-Soda taxes - ChangeLab Solutions. State and local backgrounders.
2 Afshin 2017 - Afshin A, Peñalvo JL, Gobbo LD, et al. The prospective impact of food pricing on improving dietary consumption: A systematic review and meta-analysis. PLoS ONE. 2017;12(3):e0172277.
3 Falbe 2016 - Falbe J, Thompson HR, Becker CM, et al. Impact of the Berkeley excise tax on sugar-sweetened beverage consumption. American Journal of Public Health. 2016;106(10):1865-1871.
4 Niebylski 2015 - Niebylski ML, Redburn KA, Duhaney T, Campbell NR. Healthy food subsidies and unhealthy food taxation: A systematic review of the evidence. Nutrition. 2015;31:787-795.
5 AHA-Mozaffarian 2012 - Mozaffarian, D., Afshin, A., Benowitz, N.L., Bittner, V., Daniels, S.R., Franch, H.A., Jacobs, D.R., Kraus, W.E., Kris-Etherton, P.M., Krummel, D.A., Popkin, B.M., Whitsel, L.P., & Zakai, N.A. (2012). Population approaches to improve diet, physical activity, and smoking habits: A scientific statement from the American Heart Association (AHA). Circulation, 126(12), 1514-1563.
6 Novak 2011 - Novak NL, Brownell KD. Taxation as prevention and as a treatment for obesity: The case of sugar-sweetened beverages. Current Pharmaceutical Design. 2011;17(12):1218-1222.
7 Finkelstein 2013 - Finkelstein EA, Zhen C, Bilger M, et al. Implications of a sugar-sweetened beverage (SSB) tax when substitutions to non-beverage items are considered. Journal of Health Economics. 2013;32(1):219-239.
8 Dharmasena 2012 - Dharmasena S, Capps O Jr. Intended and unintended consequences of a proposed national tax on sugar-sweetened beverages to combat the U.S. obesity problem. Health Economics. 2012;21(6):669-694.
9 Cawley 2015 - Cawley J. An economy of scales: A selective review of obesity's economic causes, consequences, and solutions. Journal of Health Economics. 2015;43:244-268.
10 Cawley 2016 - Cawley J, Frisvold DE. The pass-through of taxes on sugar-sweetened beverages to retail prices: The case of Berkeley, California. Journal of Policy Analysis and Management. 2016.
11 Eyles 2012 - Eyles H, Ni Mhurchu C, Nghiem N, Blakely T. Food pricing strategies, population diets, and non-communicable disease: A systematic review of simulation studies. PLoS Medicine. 2012;9(12):e1001353.
12 Urban-Engelhard 2009 - Engelhard C, Garson A, Dorn S. Reducing obesity: Policy strategies from the tobacco wars. Washington, D.C.: Urban Institute; 2009.
13 Sturm 2010 - Sturm R, Powell LM, Chriqui JF, Chaloupka FJ. Soda taxes, soft drink consumption, and children’s body mass index. Health Affairs. 2010;29(5):1052-1058.
14 Fletcher 2010a - Fletcher JM, Frisvold D, Tefft N. Can soft drink taxes reduce population weight? Contemporary Economic Policy. 2010;28(1):23-35.
15 Powell 2009 - Powell LM, Chaloupka FJ. Food prices and obesity: Evidence and policy implications for taxes and subsidies. Millbank Quarterly. 2009;87(1):229-257.
16 Powell 2013 - Powell LM, Chriqui JF, Khan T, Wada R, Chaloupka FJ. Assessing the potential effectiveness of food and beverage taxes and subsidies for improving public health: A systematic review of prices, demand and body weight outcomes. Obesity Reviews. 2013;14(2):110-128.
17 Todd 2010 - Todd J, Zhen C. Can taxes on calorically sweetened beverages reduce obesity? Choices: The Magazine of Food, Farm and Resource Issues. 2010;25(3).
18 USDA-Smith 2010 - Smith TA, Lin BH, Lee JY. Taxing caloric sweetened beverages: Potential effects on beverage consumption, calorie intake, and obesity. Washington, D.C.: Economic Research Service (ERS), U.S. Department of Agriculture (USDA); 2010: ERR-100.
19 Kuchler 2005a - Kuchler F, Golan E, Variyan JN, Crutchfield SR. Obesity policy and the law of unintended consequences. Amber Waves. 2005;3(3).
20 Fletcher 2010b - Fletcher JM, Frisvold DE, Tefft N. The effects of soft drink taxes on child and adolescent consumption and weight outcomes. Journal of Public Economics. 2010;94(11-12):967-974.
21 Restrepo 2020 - Restrepo BJ, Cantor JH. The effects of soda taxes on adolescent intake and blood sugar. Health Economics. 2020;29(11):1422-1434.
22 Edmondson 2022 - Edmondson EK, Shea JA, Gregory EF, et al. Low-income parents’ perceptions of a sweetened beverage tax in Philadelphia. Journal of Nutritional Science. 2022;11:e67.
23 Oddo 2021 - Oddo VM, Leider J, Powell LM. The impact of Seattle’s Sugar-Sweetened Beverage Tax on substitution to sweets and salty snacks. Journal of Nutrition. 2021;151(10):3232-3239.
24 Lozano-Rojas 2022 - Lozano-Rojas F, Carlin P. The effect of soda taxes beyond beverages in Philadelphia. Health Economics. 2022;31(11):2381-2410.
25 Silver 2017 - Silver LD, Ng SW, Ryan-Ibarra S, et al. 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. PLoS Medicine. 2017;14(4):e1002283.
26 Powell 2021 - Powell LM, Leider J. Impact of a sugar-sweetened beverage tax two-year post-tax implementation in Seattle, Washington, United States. Journal of Public Health Policy. 2021;42:574-588.
27 Lin 2011 - Lin BH, Smith TA, Lee JY, Hall KD. Measuring weight outcomes for obesity intervention strategies: The case of a sugar-sweetened beverage tax. Economics and Human Biology. 2011;9(4):329-341.
28 French 2001 - French SA, Story M, Jeffrey RW. Environmental influences on eating and physical activity. Annual Review of Public Health. 2001;22:309-335.
29 Long 2015a - Long MW, Gortmaker SL, Ward ZJ, et al. Cost effectiveness of a sugar-sweetened beverage excise tax in the U.S. American Journal of Preventive Medicine. 2015;49(1):112-123.
30 CHOICES - Childhood Obesity Intervention Cost Effectiveness Study (CHOICES). Reversing the obesity epidemic with cost-effective strategies: Publications, briefs, and reports.
31 Cawley 2021 - Cawley J, Crain C, Frisvold D, Jones D. The pass-through of the largest tax on sugar-sweetened beverages: The case of Boulder, Colorado. American Journal of Agricultural Economics. 2021;103(3):987-1005.
32 Nau 2018 - Nau C, Kumanyika S, Gittelsohn J, et al. Identifying financially sustainable pricing interventions to promote healthier beverage purchases in small neighborhood stores. Preventing Chronic Disease. 2018;15:E12.
33 Powell 2014 - Powell LM, Wada R, Persky JJ, Chaloupka FJ. Employment impact of sugar-sweetened beverage taxes. American Journal of Public Health. 2014;104(4):672-677.
34 Tax Foundation-Soda Tax - Tax Foundation. TaxEDU. Soda tax.
35 Crosbie 2021 - Crosbie E, Pomeranz JL, Wright KE, Hoeper S, Schmidt L. State preemption: An emerging threat to local sugar-sweetened beverage taxation. American Journal of Public Health. 2021;111(4):677-686.
36 Berkeley-SSB tax - City of Berkeley, CA. Berkeley Municipal Code Chapter 7.72: Sugar-sweetened beverage product distribution tax. Effective January 1, 2015.
37 Philadelphia-Beverage tax - City of Philadelphia, Pennsylvania. Philadelphia beverage tax.
38 Cook County-SSB tax - Cook County, Illinois. Cook County sweetened beverage tax.
39 SF Gate-Knight 2016 - Knight H. S.F., Oakland, Albany voters pass soda tax. SF Gate. November 8, 2016.
40 Barker 2022 - Barker AR, Mazzucca S. The impact of sugar-sweetened beverage taxes by household income: A multi-city comparison of Nielsen purchasing data. 2022.
41 Rudd-Friedman 2012 - Friedman R, Brownell K. Sugar-sweetened beverage taxes: An updated policy brief. New Haven: Yale Rudd Center for Food Policy & Obesity; 2012.
42 Backholer 2016 - Backholer K, Sarink D, Beauchamp A, et al. The impact of a tax on sugar-sweetened beverages according to socio-economic position: A systematic review of the evidence. Public Health Nutrition. 2016;19(17):3070-3084.
43 Leider 2019 - Leider J, Powell LM. Sugar-sweetened beverage prices: Variations by beverage, food store, and neighborhood characteristics, 2017. Preventive Medicine Reports. 2019;15:100883.
44 Madsen 2019 - Madsen KA, Falbe J, Olgin G, Ibarra-Castro A, Rojas N. Purchasing patterns in low-income neighbourhoods: Implications for studying sugar-sweetened beverage taxes. Public Health Nutrition. 2019;22(10):1807-1814.
45 USDA-Ballinger 1978 - Ballinger RA. A history of sugar marketing through 1974. Washington, D.C.: U.S. Department of Agriculture (USDA). 1978;(382).
46 Gerber 1976 - Gerber D. The United States Sugar Quota Program: A study in the direct congressional control of imports. The Journal of Law & Economics. 1976;19(1):103-147.
47 USDA-Sugar and Sweeteners - U.S. Department of Agriculture (USDA). Sugar & sweetener. Policy.
48 IN Sugars - Indiana Sugars. Why is sugar a government subsidized commodity? 2021.
49 Bosma 2023 - Bosma U. How the world got hooked on sugar. TIME. 2023.
50 Temple 2022 - Temple JA, Ou SR, Reynolds AJ. Closing achievement gaps through preschool-to-third-grade programs. Frontiers in Education. 2022;7.
51 NPR-Bustillo 2023a - Bustillo X. The USDA wants to limit added sugars and sodium in school meals. National Public Radio (NPR). 2023.
Related What Works for Health Strategies
To see all strategies:
countyhealthrankings.org/whatworks