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The Soda Tax that’s Sweeping the Nation

  • 13 December 2016
  • Author: Alexander Carr
  • Number of views: 1106
  • 0 Comments
The Soda Tax that’s Sweeping the Nation

xcise taxes are often added to purchases that are considered “bad for you.” That’s why you’ll routinely see excise taxes on gasoline, tobacco products, tanning beds, wagering bets and other vices. It’s not surprising, then, that a soda tax is beginning to take shape in many U.S. cities. What is surprising is the effect it’s already had on sugary drink consumption.

In 2014, Berkley, California, voters levied a penny-per-ounce tax on soda and other sugary drinks (like popular caffeinated drinks). The result?  One controversial study found low-income Berkeley neighborhoods slashed sugar-sweetened beverage consumption by more than one-fifth from the year before, which proves the old adage: “If you tax something, you will sell less of it.”

“From a public health perspective, that is a huge impact. That is an intervention that’s more powerful than anything I’ve ever seen aimed at changing someone’s dietary behavior,” the study’s senior author Dr. Kristine Madsen told Reuters.

Philadelphia, Boulder and San Francisco are among dozens of other U.S. cities considering a similar measure although the soda industry has spent millions of dollars defeating many of those measures already.  Philadelphia’s 1.5 cents-per-ounce tax is expected to take effect on January 1 and will significantly raise the cost of the sugary drinks, as the Philadelphia Inquirer illustrates here.

While it’s easy to assume the soda tax hits the “big soda” manufacturers and distributors hardest, how it and other similar excise taxes affect small businesses is unclear. Will your neighborhood gas station suffer or will consumers simply switch to bottled water or diet drinks instead? How will restaurants and other food service establishments handle the increase? The answers depend on the complicated economic rules of price elasticity. For questions on how changing excise taxes may affect your business, contact us.

Image Copyright: prapholl / 123RF Stock Photo

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