New studies have explored the impact of taxes on sugary drinks by analyzing the buying habits of around 400 households in Seattle, San Francisco, Oakland, and Philadelphia. The findings revealed that following the tax’s introduction, lower-income households cut their sugary drink purchases by nearly 50%, while higher-income households reduced theirs by 18%.
Eight cities across the United States have implemented taxes on sugar-sweetened beverages, which are linked to health problems such as obesity and Type 2 diabetes.
Recent research from the University of Washington examined how households in Seattle, San Francisco, Oakland, and Philadelphia responded to newly enacted beverage taxes. This research was published online on September 30 in Health Economics.
According to the study, after the tax was put in place, lower-income households significantly reduced their sweetened beverage purchases by almost 50%, while higher-income households lowered their purchases by 18%. Since earlier studies indicated that lower-income individuals tend to consume more sweetened drinks than the average, these findings imply that such taxes could potentially lessen health inequalities and enhance public health.
“Reducing sugar consumption can lead to health improvements,” stated Melissa Knox, a co-author and UW associate teaching professor of economics. “Sweetened beverages are major contributors of sugar in the American diet. They pose various health risks and lack nutritional value. The tax aims to help lower-income populations, as they typically reduce their intake more, thus gaining greater health advantages compared to higher-income households.”
To gather data, researchers utilized the Nielsen Consumer Panel, tracking the same households for a year before and after the tax was enacted in their city. Consumers used handheld scanners to record their purchases.
The analysis showed that households faced an increase in prices for taxed beverages, a trend that continued for at least one year after the tax was implemented. The price hikes were most pronounced for lower-income households, with a 22% increase in sweetened beverage prices contrasted with an 11% increase for higher-income households. Following the tax’s introduction, lower-income households exhibited a 47% drop in their purchase of sugary drinks. Researchers did not observe any significant increase in cross-border shopping after the tax was applied.
“We also examined untaxed beverages and noted that lower-income households are opting for these alternatives,” Knox added. “They are reallocating their funds to purchase different drinks rather than opting for snacks like candy bars instead of sodas.”
Policymakers are particularly focused on how lower-income consumers react, given their elevated levels of sugary beverage consumption and the potential regressive nature of these taxes.
Previous research from the University of Washington indicated that both lower-income and higher-income households contributed nearly the same amount towards the tax, meaning that lower-income households spent a greater portion of their income. However, the study also showed that more funds were directed towards initiatives that benefit lower-income communities than those households paid in taxes. The annual net benefit for lower-income communities was estimated to range from $5.3 million to $16.4 million each year across three U.S. cities.
Furthermore, earlier UW studies found that the tax correlated with decreases in childhood body mass index among Seattle children compared to a well-matched control group.
“Collectively, this collection of research suggests that the tax is achieving its desired health outcomes, and this new evidence supports the idea that health benefits may be even more pronounced for lower-income households,” commented Jessica Jones-Smith, co-author and UW professor of health systems and population health.
The research was supported by the UW’s Royalty Research Fund and the Robert Wood Johnson Foundation, with additional backing from a Eunice Kennedy Shriver National Institute of Child Health and Human Development research infrastructure grant.
