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 beverages. 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 ventures.
Expected Beneficial Outcomes (Rated)
Reduced sweetened beverage consumption
Other Potential Beneficial Outcomes
Improved weight status
Reduced obesity rates
Evidence of Effectiveness
There is some evidence that sugar sweetened beverage (SSB) taxes decrease consumption of soda and other sweetened beverages, although current tax levels are generally too low to significantly affect consumer behavior1, 2, 3, 4, 5, 6, 7, 8. SSB 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. However, additional evidence is needed to confirm effects.
Current soda sales tax levels, typically no more than 4% of purchase price, may not substantially reduce consumption overall13, but may benefit at-risk children13 and have a small effect on adults’ weight14. Existing soda taxes do not appear to be associated with adolescent body mass index (BMI)6, 15.
Higher magnitude effects could occur if taxes were higher than current levels6, 15, 16, 17, 18. 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%1. A similar excise tax, implemented in Mexico in 2014, also decreased SSB purchases and increased purchases of non-taxed, healthier alternatives; these effects were largest among low income households2. Estimates suggest that raising the cost of SSBs by 20% would decrease calorie consumption and result in weight loss5, 7, 8, 17.
Reductions in child and adolescent soda consumption may be offset by increases in consumption of other high calorie drinks if taxes are too narrow in scope19, 9. Taxes in small geographic areas may also have minimal effects on consumption, since consumers can easily purchase SSBs in neighboring areas without such taxes9. A study of Mexico’s tax suggests that soda taxes increase the price consumers pay by the amount of the tax20; however, in Berkeley, the consumer price increased by less than half the amount of the tax, perhaps due to store owner concerns about consumers shopping in other cities10.
Models estimate a 0.5 cent per ounce soda tax generates $5.8 billion annually in tax revenue21, which could support nutrition initiatives through subsidies for fruits and vegetables22 or funding for obesity prevention18, 3. 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 revenue23; city-level models suggest that a one cent per ounce municipal SSB tax is also cost-effective24.
Price changes are likely to have a greater effect on the purchasing decisions of low income families than higher income families, as seen in Berkeley and Mexico1, 2, 25, and youth than adults4. Greater reductions in SSB consumption may lead to more health benefits and larger reductions in obesity rates among low income families25. 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, 26.
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 opportunities27.
Impact on Disparities
As of 2014, 34 states and Washington, DC have sales taxes on soda sold in food stores. In 20 states, sales taxes on soda are higher than the general state sales tax for food products. In 30 states, sales tax on soda sold through vending machines is higher than the general state sales tax for food products28.
In March 2015, Berkeley, California implemented a penny per ounce tax on sugar sweetened beverages, the first city-level tax in the nation10, 29. As of 2017, six additional cities passed SSB taxes: Philadelphia, Pennsylvania passed a 1.5 cent per ounce tax30; Boulder, Colorado passed a two cent per ounce tax; and one cent per ounce taxes were passed in Cook County, Illinois31 and three Bay Area cities (San Francisco, Oakland, and Albany)32.
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.
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1 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.
2 Cochero 2017 - Cochero MA, Rivera-Dommarco J, Popkin BM, Ng SW. In Mexico, evidence of sustained consumer response two years after implementing a sugar-sweetened beverage tax. Health Affairs. 2017;36(2):1-8.
3 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.
4 AHA-Mozaffarian 2012 - Mozaffarian D, Afshin A, Benowitz NL, et al. Population approaches to improve diet, physical activity, and smoking habits: A scientific statement from the American Heart Association (AHA). Circulation. 2012;126(12):1514-1563.
5 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):1218–22.
6 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):110–28.
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):219–39.
8 Dharmasena 2012 - Dharmasena S, Capps O Jr. Intended and unintended consequences of a proposed national tax on sugar-sweetened beverages to combat the US obesity program. Health Economics. 2012;21(6):669–94.
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, DC: 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):1052-8.
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):229-57.
16 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).
17 USDA-Smith 2010 - Smith TA, Lin BH, Lee JY. Taxing caloric sweetened beverages: Potential effects on beverage consumption, calorie intake, and obesity. Washington, DC: Economic Research Service (ERS), US Department of Agriculture (USDA); 2010: ERR-100.
18 Kuchler 2005a - Kuchler F, Golan E, Variyan JN, Crutchfield SR. Obesity policy and the law of unintended consequences. Amber Waves. 2005;3(3).
19 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):967-74.
20 NBER-Grogger 2015 - Grogger J. Soda taxes and the prices of sodas and other drinks: Evidence from Mexico. National Bureau of Economic Research (NBER). 2015: Working paper 21197.
21 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):329–41.
22 French 2001 - French SA, Story M, Jeffrey RW. Environmental influences on eating and physical activity. Annual Review of Public Health. 2001;22:309-35.
23 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.
24 CHOICES - Childhood Obesity Intervention Cost Effectiveness Study (CHOICES). Reversing the obesity epidemic with cost-effective strategies: Publications, briefs, and reports.
25 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.
26 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.
27 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.
28 BTG-Soda or snack - Bridging the Gap (BTG). Soda/snack taxes.
29 Berkeley-SSB tax - City of Berkeley, CA. Berkeley Municipal Code Chapter 7.72: Sugar-sweetened beverage product distribution tax.
30 Philadelphia-Beverage tax - City of Philadelphia, Pennsylvania. Philadelphia beverage tax.
31 Cook County-SSB tax - Cook County, Illinois. Cook County sweetened beverage tax.
32 UCONN Law-Cox 2016 - Cox S. Sugary drinks taxation. UCONN School of Law, Law Library Blog. 2016.
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