New research backs the argument that “sin taxes” lead to a reduction in consumption, justifying the use of the duties in combating obesity and other health issues, its authors say.
The 2017 decision by city officials in Philadelphia to impose a beverage tax on sugary and artificially-sweetened drinks caused sales to drop by 38 percent, according to a study published Tuesday.
Philadelphia is one of seven US cities to have enacted the measure in recent years, along with France, Mexico and other jurisdictions.
Starting January 1, 2017, the East Coast city of 1.6 million people began adding a tax of 1.5c per ounce on all sweetened drinks, including “diet” sodas.
Researchers used Baltimore, where the tax was not imposed, as a control because of its similar socio-demographic and health profile.
The study, published in the Journal of the American Medical Association (JAMA), found that Philadelphia shops passed on the additional costs to consumers, either in whole or in part, leading to a 51 percent reduction of sales within the city.
Areas bordering the city that were not affected by the tax saw a bump in sales, but after accounting for this effect, the net fall in sales was estimated at 38 percent on year.
For co-author Christina Roberto, the numbers confirm a foundational economic theory: if the price of a product goes up, fewer people will buy it.
“Taxing sugar-sweetened beverages is one of the most effective policy strategies we have to reduce purchases,” said the assistant professor of health policy at the University of Pennsylvania, adding it was a “public health no-brainer.”
The overall goal is to achieve better health outcomes: reduction of obesity, cavities and diabetes – markers the researchers did not measure in this study.
But they believe that reducing the intake of added sugars is a step in the right direction.
In the United States, children consume 17% of their calories from added sugars instead of the recommended 10%, with half of those sugars coming from drinks.
Children from lower-income families, and black children and teenagers, were more likely to consume fruity or sugary drinks than those from higher-income or white families.
“Current evidence is already sufficient to move forward with adoption of taxes while continuing to monitor outcomes,” wrote a group of public health experts in an editorial published by JAMA.
Reacting to the paper, the American Beverage Association criticized the tax, saying it “hurt working families, small local business and their employees.”
Spokesman William Dermody added that American’s beverage companies were creating more drinks with less or no sugar with smaller bottles.
The decline in sales was particularly sharp in large supermarkets and for so-called “family” bottles and packs, though this could be explained by more visible information panels informing consumers about the changes.
The study also found no substitution effect or increase in sales for non-taxed beverages.
Philadelphia’s relatively large low-income population could account for the big drop in sales, since these consumers are more likely to be price-sensitive. The study found sales in Baltimore remained stable over the same period.
The Philadelphia tax proved more dissuasive than in Berkeley, which was the first to enact the measure and charges an extra cent per ounce. The taxes are highest in Boulder, Colorado (two cents per ounce) and Seattle, Washington (1.75c).
Cook County in Illinois, which includes the city of Chicago, implemented a soda tax in August 2017, making it briefly the biggest US city with the levy. But it was repealed two months later after intense lobbying from the soft drinks industry.