A California Soda Tax Experiment Worked Perfectly

Sarah Palin, former Governor of Alaska, holds up a large soda as she speaks about New York City Mayor Michael Bloomberg's proposed large soda ban and tax in 2013

Sarah Palin holds up a large soda as she speaks about a proposed soda tax | Pete Marovich/Getty Images

Almost everyone hates taxes. Almost everyone loves soda — they may not drink it, but it’s delicious nonetheless. So, what happens when the two collide? A soda tax, and it’s something that we’ve seen pop up more and more around the country over the past few years. The fact of the matter is, soda has been tied to many deadly diseases, and there is justification for policymakers to want to take action.

When cities or states put taxes on certain products (cigarettes, alcohol, etc.), it’s in an effort to actually make them more expensive. Because when things are more expensive, fewer people will buy them. It’s an incentive not to buy or use something — the costs go up, and some marginal consumers will choose to alter their behavior in response. In the case of soda taxes, the desired result is to get people to drink less soda. In Berkeley, California, the implementation of a soda tax has worked pretty much perfectly.

According to a new study published in the American Journal of Public Health, Berkeley’s $0.01 per liquid ounce tax on soda and other sugar-sweetened beverages has had a dramatic impact on consumer behavior — a 21% drop in soda consumption overall.

Berkeley was the first city in the country to try out such a tax, and as this study reveals, it’s worked astoundingly well.

Carrots, sticks, and the soda tax

soda

Soda | iStock.com

While a penny-per-ounce in additional costs doesn’t sound like an incredible burden for consumers, the numbers indicate that it was enough to dissuade people from purchasing sweetened drinks. That would, for example, only add an extra 20 cents to the purchase of a 20-ounce bottle of Coke or Pepsi, which many consumers may not even think twice about. But the numbers don’t lie; consumption has dropped by more than one-fifth.

“Low-income communities bear the brunt of the health consequences of obesity and diabetes, so this decline in soda and sugary beverage consumption is very encouraging,” said study senior author Kristine Madsen, an associate professor of public health at UC Berkeley, in a press release. “We are looking for tools that support people in making healthy choices, and the soda tax appears to be an effective tool.”

But what’s even more incredible is how consumer behavior in Berkeley’s low-income areas compared to those in cities where a soda tax had not been implemented. The researchers kept an eye on neighborhoods in Oakland and San Francisco — neither of which had implemented a beverage tax — and found that in those areas, consumers actually increased their consumption by 4%. This gives researchers even more cause to believe the soda tax was the primary factor driving people changing their drinking habits.

A flood of new taxes?

U.S. nickels

U.S. nickels | Alex Wong/Getty Images

For lovers of sweetened beverages, this may be worrisome news. As mentioned, Berkeley was the first city to go ahead with such a tax, and with subsequent studies showing such success, it’s not unreasonable to think many other cities across the country might want to adopt one of their own.

That’s something we’ve already seen in the interim, actually. Philadelphia recently passed a similar tax, becoming the nation’s first major city to do so. It’s also been a hot topic in New York City, where policymakers have tried to enact strict rules around the sizes of soft drinks that can be sold. That was met with a lot of resistance and was largely seen as an ineffective way of trying to lower consumption, as consumers could simply buy two smaller drinks instead of one large one. That ban on large sodas was eventually thrown out by the courts.

But with the unveiling of this most recent study and the success of Berkeley’s tax officially on the books, you can bet policymakers around the country are going to take notice. For soft drink lovers, this means your favorite beverages may soon become slightly more expensive.

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