Taxes on sugary drinks cut consumer sales by 33%, study says

CNN
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Raising the price of sugar-sweetened sodas, coffees, teas and energy, sports and fruit drinks by an average of 31% reduced consumer purchases of those drinks by a third, according to a new analysis of restrictions implemented in five US cities.

“What we measured is how consumers change their consumption in response to price changes,” said study author Scott Kaplan, an assistant professor of economics at the US Naval Academy in Annapolis, Maryland.

“For every 1% increase in price, we found a 1% decrease in purchases of these products,” Kaplan said. “The decrease in consumer purchases occurred almost immediately after the taxes were put in place and stayed that way over the next three years of the study.”

William Dermody, vice president of media and public affairs for the American Beverage Association, a representative for the sugar-sweetened and diet beverage industry, told CNN via email that such taxes are “unproductive” and hurt consumers, small business and their employees.

“The beverage industry’s strategy of offering consumers more choices with less sugar, smaller portion sizes and clear calorie information is working – today nearly 60% of all beverages sold have zero sugar and the calories that people get from beverages has decreased to its lowest level in decades,” Dermody said.

Many sugar-sweetened beverages are packed with calories, have little to no nutritional value and contribute to chronic diseases, including heart disease, cancer, diabetes, obesity and stroke, studies have found. Even one serving daily of a sugary soft drink was associated with higher risk of cardiovascular disease, according to a 2020 study.

No or low-calorie diet drinks have also been linked to chronic disease, while both sugary and artificially sweetened beverages have been shown to increase the risk of dying early from several causes.

The new study did not examine the health impact of reducing sales of sugary drinks, but an earlier one by Tufts University researchers did, Kaplan said.

That study, published in 2019, found that a 15% to 20% reduction “in consumption of sugary beverages, if expanded nationally, would reduce the health care costs over the average American life span by $270 per person, or $45 billion in total,” Kaplan said.

It’s likely that a 33% reduction in consumer purchases would have a similar impact on health care costs, said Tufts researcher Parke Wilde, lead author of the 2019 study.

“Based on the large, estimated impacts on beverage purchases in this study, it is likely that these beverage taxes reduced obesity, heart disease, and deaths in the 5 cities,” said Wilde, a professor in Tuft’s Friedman School of Nutrition and Science Policy in Boston.

“The main contribution of this new study is the improved estimate of price effects. If this study had existed when we did our research, I would have cited it,” Wilde said in an email. “It seems to me the best estimate of price effects I have seen.”

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Nine US jurisdictions and more than 50 countries have implemented some form of consumer tax on sugar-sweetened beverages, typically by taxing distributors who then pass that cost along to consumers, Kaplan said.

Some US cities have enacted sales taxes on sugary beverages at checkout, typically at the rate of 1% to 2%, Kaplan said. Other cities tax those drinks by the ounce, which raises the overall price of the product even more.

“Maybe you spend $1 on a 12-ounce can of soda,” he said. “If it’s a 2 cent per ounce tax, that’s an additional 24 cents on your dollar.”

Sales taxes, however, do not affect the consumer pocketbook to the same extent. For example,

Washington, DC, puts an 8% sales tax on sugar-sweetened beverages, 2% above the standard 6% sales tax. Now that same can of soda costs 2 cents more, instead of an additional 24 cents under the per ounce tax.

“So, the per ounce tax is much bigger, and we think of those as sort of being the type of taxes that are actually having the potential to drive bigger impacts,” Kaplan said.

The analysis, published Friday in JAMA Health Forum, looked at per ounce tax plans by ZIP code in Boulder, Colorado; Oakland, California; Philadelphia; Seattle; and San Francisco.

“We only looked at sugar-sweetened beverages that are sold in retail or convenience stores. Mass merchandise stores, supermarkets, convenience stores and drugstores made up our sample,” Kaplan said.

The impact on sales of sugar-sweetened beverages in restaurants and of sales taxes on artificially sweetened drinks were not part of the study, he said. However, one of the cities studied, Philadelphia, does tax diet drinks with great success, Kaplan said. Because the taxes are more “broadly encompassing, including both regular and artificially sugar-sweetened beverages,” other studies have found Philly’s success rate at reducing consumer consumption to be larger than many other cities, he added.

Despite the impact of sugar taxes found by this study and others, additional cities may have a difficult time enacting such public health programs in the future, Kaplan said.

“The last tax that we looked at was implemented in January 2018. And you might ask, ‘Well, why haven’t there been any more?’ And that’s because states like California and Washington have passed bills to basically preempt cities from doing so,” Kaplan said.

“If states are going to preempt these taxes from going into place at the city level, then we might consider ways for these taxes to be implemented at a larger geographic level, potentially even at a federal level.”