Two recent working papers from the National Bureau of Economic Research report on Philadelphia’s beverage tax. This tax, implemented in January 2017, added $0.015 per ounce to the price of sweetened beverages in Philadelphia. The beverage tax is levied on distributors, not retail vendors; it is levied on both regular (caloric) and diet (noncaloric) sweetened beverages and not on unsweetened beverages, fruit juices and milk.
The impact of the Philadelphia beverage tax on prices and product availability / John Cawley et al. (NBER Working Paper no. 24990. September 2018) shows that “on average, distributors and retailers fully pass the tax through to consumers, but there is heterogeneity in the pass-through rate among stores. Pass-through is greater among stores in higher-poverty neighborhoods, stores located farther from untaxed stores outside Philadelphia, stores that are independent as opposed to part of national chains, and for individual servings than for larger sizes. We also find a reduction in the availability of taxed beverages and an increase in the availability of untaxed beverages, particularly bottled water, in Philadelphia stores.”
The second NBER paper, The impact of the Philadelphia beverage tax on purchases and consumption by adults and children / John Cawley et al. (NBER Working Paper no. 25052. September 2018) surveyed individuals in Philadelphia and nearby communities before the tax and nearly one year after its imposition, finding that “purchases of taxed beverages fell by 8.9 ounces per shopping trip in Philadelphia stores relative to comparison stores outside of the city and that Philadelphia residents increased purchases of taxed beverages outside of the city. The tax reduced adults’ frequency of regular soda consumption by 10.4 times per month, and there is some evidence of a slight reduction in adults’ overall sugar consumption from sweetened beverages, with larger reductions for African-American adults. The tax did not have a substantial effect on the frequency of adults’ consumption of other beverages. We generally do not find detectable effects of the tax on children’s consumption of beverages, although we find a substantial reduction in consumption of added sugars from sweetened beverages among children who had high pre-tax consumption levels.”
The Penn Libraries provide online subscription access to NBER working papers for Penn-affiliated readers.