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August 24 2016

The Demographics of the Soda Tax

Patrice L. Onwuka

If you raise the price on a good, economics and human nature dictate that people will buy or consume less of that product. That appears to be the case for poor Berkeley, CA residents and sugary drinks.

Last year, Berkley led the nation in instituting a special penny-per ounce tax on sugary beverages. To measure the impact of the tax, researchers probed residents in the same neighborhoods about the frequency of their soda consumption before and after the tax was instituted. The newly published study of those residents found a 20-percent drop in consumption habits. Broken out by types of drinks: regular soda consumption fell 26 percent, while energy drinks and sports drinks fell 29% and 36%, respectively. Sweetened fruit drinks, coffee and tea fell 13%.

Furthermore, water consumption was up significantly (63 percent), suggesting that residents switched from soda and energy drinks to water.

At the time Berkeley was considering its tax, San Francisco proposed a similar tax, but it failed to pass. Prices remained the same in San Francisco, but consumption of sugary beverages slightly increased –making the 20 percent decline in Berkley more noticeable. San Franciscans consumed only 18 percent more water.

Before more nanny-state mayors jump on board, there are reasons for caution with these findings. First, this may be an initial bump that won’t be sustainable. People react strongly to a new tax. In Mexico for example, when a 10 percent tax was introduced in January of 2014, purchases fell 6 percent, but began rising again.

Second, there’s a relatively large margin pf error in the estimates of beverage consumption according to other researchers.

Perhaps the biggest question is how much of the drop in consumption was due to the tax versus the public awareness campaign that educated area residents about the tax:

“It’s possible that successful campaigning around the tax raised awareness of the health impacts of sugary drinks, which may have also shifted dietary choices in Berkeley,” said study lead author Jennifer Falbe, a postdoctoral fellow at UC Berkeley.

Future studies may help distinguish between the impact of increased prices versus awareness, Falbe said.

In Berkeley, the tax is intended to support municipal health and nutrition programs. To that end, the city has created a panel of experts in child nutrition, health care and education to make recommendations to the City Council about funding programs that improve children’s health across Berkeley.

And of course, the beverage industry had qualms with the survey’s methodology. They argue that man-on-the-street surveys are unreliable, which is a reasonable criticism. Did the researchers probe the very same people who initially took the survey before the tax was instituted? What about the impact on sales? Interviews with store owners? Other critical qualitative and quantitative data is missing.

Regardless, this data will be used as ammunition for cities taking up the issue this fall:

The larger neighboring cities of San Francisco and Oakland are expected to vote on a penny-per-ounce levy on sugary drinks in November ballot initiatives, while Boulder, Colo., is weighing a 2-cent-per-ounce tax. Philadelphia’s city council in June approved a tax of 1.5 cents per ounce on sweetened drinks, becoming the second U.S. city to pass such a measure.

Soda taxes are just a means of government officials and elite “experts” telling people what to consume. While it appears that the motivation is all about health, why not just provide the educational campaign and leave out the revenue-raising tax. If people change their behavior then their decline may be sustainable rather than a knee-jerk response to a higher price.

Also, as noted above the tax goes to create a bureaucracy of health and nutrition programs – i.e. jobs for nutritionists. They have a personal interest in pushing this agenda.

Finally, let’s not forget that such sin taxes hit people in poor neighborhoods who don’t need the added costs of a tax on their consumption. Sin taxes are regressive – meaning they hurt those who need relief not more pressure on their limited resources.

An affluent person has more choices than a poor person under the nanny state soda regime.

Let’s not raise a glass to this sin tax.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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