Taxes on sweetened drinks reduce consumption in lower-income households by almost 50%, study shows

Eight cities in the United States have introduced taxes on sugar-sweetened beverages, which contribute to health problems including obesity and type 2 diabetes.

New research from the University of Washington examined responses to softened liquor taxes based on the purchasing behavior of approximately 400 households in Seattle, San Francisco, Oakland and Philadelphia – all of which recently implemented liquor taxes. The study was published in Health economics.

Researchers found that after the introduction of the tax, lower-income households reduced their purchases of sweetened beverages by almost 50%, while higher-income households reduced their purchases by 18%. Because previous studies have shown that lower-income people consume more sweetened beverages than average, these results suggest that taxes could help reduce health disparities and promote public health.

“If households reduce their sugar intake, they will experience health benefits,” said Melissa Knox, co-author and UW associate professor of economics. “Sweetened beverages are one of the largest sources of sugar in the American diet. They have all kinds of health consequences and do not actually provide any nutrition. The idea behind the tax is that people with lower incomes, because they reduce their intake more, receive greater health benefits than higher-income households.”

Using the Nielsen Consumer Panel, researchers tracked households for a year before and after the tax was introduced in their city. Consumers were given a handheld scanner to report their purchases.

The results showed that households experienced price increases for taxed drinks, with the after-tax difference persisting for at least another year. Price increases were greatest for lower-income households, with a 22% increase in sweetened beverage prices, compared to 11% for higher-income households. After the tax was implemented, lower-income households saw a 47% drop in sweetened beverage purchases. Researchers have not observed an increase in cross-border shopping after taxes.

“We also looked at untaxed beverages and found that lower-income households are substituting untaxed beverages,” Knox said. “They use some of their money to buy another drink, rather than buying a candy bar instead of a Coke.”

Policymakers are particularly interested in the response of lower-income consumers because of their higher average consumption of sweetened beverages and concerns that taxes are regressive.

Previous research from the UW had found that lower- and higher-income households paid about the same amount in taxes, meaning lower-income households spent a greater share of their income. But the study also showed that more dollars went to financing programs that benefit lower-income communities than the households that paid in taxes. The annual net benefit to lower-income communities ranged from $5.3 million to $16.4 million per year in three U.S. cities.

Additional past research of the UW found that the burden was also associated with a decrease in body mass index in children in Seattle, compared to a well-matched comparison group.

“Together, this body of work suggests that the tax is delivering the intended health benefits, and this new evidence gives reason to believe that the health benefits could be greater for lower-income households,” said Jessica Jones-Smith, co-author and UW professor in healthcare. systems and public health.