Healthy Food America today released Are Sugary Drink Taxes Working? Early Evidence Says Yes, a research brief analyzing studies of sugary drink taxes designed to reduce consumption. Read the brief here.
After years of projections about whether sugary drink taxes would impact consumption, early evidence is in. These taxes have significantly lowered consumption in Mexico and Berkeley (CA) according to studies conducted in each region.
For this research brief, we reviewed and analyzed evidence gathered from these locales and others, and assessed whether the beverage industry’s counterarguments to sugary drink taxes ring true.
- Sugary drink taxes have led to a significant decline in sugary drink consumption in Mexico and Berkeley, CA
- Reduced consumption of sugary drinks caused by taxes is expected to prevent thousands of new cases of obesity, diabetes, heart disease, and reduce health care costs
- Evidence so far does not support industry claims that taxes will have a negative impact on jobs and small businesses
Sales and consumption impacts analyzed
Mexico and Berkeley have both seen a significant decline in sugary drink consumption since implementing taxes while consumption of untaxed, sugar-free beverages, especially bottled water, have increased.
In Mexico, sales of sugary drinks decreased throughout the first year (2014) of tax implementation, averaging about 6 percent below what would have been expected without the tax (“counterfactual volume”). In the second year (2015), sales consistently remained about 10 percent below the counterfactual, suggesting that a tax can create a sustained reduction in sugary drink consumption. Low-income households, which tend to be the highest consumers of sugary drinks, showed the greatest decrease in purchases -- 9 percent in 2014 and 14 percent the following year.
Berkeley also saw a significant drop in the sales of taxed drinks of 10 percent a year after the tax was implemented. Untaxed beverages increased 4 percent, largely driven by a 16 percent increase in sales of bottled water.
Even more impressive, in a study that compared Berkeley to nearby Oakland and San Francisco (neither of which had a tax at the time), Berkeley residents in low-income neighborhoods reported drinking 21 percent less soda and sugary drinks than their neighbors in San Francisco and Oakland.
Does the data support industry’s anti-tax claims?
The beverage industry, which invests hundreds of millions of dollars to promote consumption of sugary drinks – with specific targeting of kids and communities of color – fights policy efforts that could impact sugar-added beverages wherever they’ve been introduced.
Industry makes two specific claims about sugary drink taxes:
- Sugary drink taxes are regressive (would hurt low income consumers more) and won’t improve health.
- Sugary drink taxes will unleash a multitude of unintended consequences including job loss, cross-border shopping to avoid the tax and small business revenue loss.
To date, taxes passed in Mexico and Berkeley have proven to be effective at reducing sugary drink consumption, and industry’s dire predictions have failed to materialize.
Claim 1: Sugary drink taxes are regressive (would hurt low income consumers more) and won’t improve health.
What the study revealed: Low-income consumers had the greatest reduction in sugary drink purchases in both Mexico and Berkeley. Data from Berkeley also found that consumers’ total grocery bills did not increase - consumers are still spending the same amount on their groceries – they’re just choosing to purchase fewer sugary drinks. The overall positive impacts of the policy will be progressive – low-income communities will reap the most health benefits from lower consumption and from increased investments in their communities, which could ultimately reduce health disparities.
The overall positive impacts of the policy will be progressive – low-income communities will reap the most health benefits from lowered consumption and from increased investments in their communities.
Claim 2: Sugary drink taxes will unleash a multitude of unintended consequences including job loss, cross-border shopping to avoid the tax and small business revenue loss.
What the study revealed: When it came to jobs and avoiding the tax through cross-border shopping, the news was also good. Researchers in Berkeley found minimal reports of cross-border shopping, and sales data showed that store revenues did not fall any more in Berkeley than in stores in neighboring cities. Preliminary data from both Mexico and Berkeley do not indicate job loss related to the tax. In Berkeley, food sector jobs actually increased 7.2 percent in the year following tax implementation, while Mexico showed no decrease in total employment in the food or beverage retail industries in 2015.
In spite of the early evidence that has been gathered, many questions about the impact of the sugary drink tax remain, including: What will be the long-term impact on weight change or disease rates? Are consumers replacing sugary drinks with other unhealthy food and drink?
While it is too early to determine the long-term health impact of the reduced sugary drink consumption seen in both Mexico and Berkeley, several robust modeling studies project that thousands of cases of obesity, diabetes and heart disease will be prevented over the next decade, along with substantial health care savings. Future research should also evaluate changes in overall dietary patterns to better determine the potential health impact of taxes.
As taxes are implemented in other U.S. jurisdictions including Philadelphia, San Francisco, Oakland, Boulder (CO), Cook County (IL), and the Navajo Nation, as well as other countries such as the United Kingdom and South Africa, new opportunities to assess the impact of these taxes in different types of communities will arise.
We will continue to update you on new studies and evidence as they become available. However, these early evaluations paint an encouraging picture of sugary drink taxes as an effective strategy to reduce sales and consumption of harmful sugary beverages, without the dire economic consequences predicted by the beverage industry.