The Impact of Soda Taxes: Pass-Through, Tax Avoidance, and Nutritional Effects

Stephan Seiler*, Anna Tuchman, Song Yao

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

The authors analyze the impact of a tax on sweetened beverages using a unique data set of prices, quantities sold, and nutritional information across several thousand taxed and untaxed beverages for a large set of stores in Philadelphia and its surrounding area. The tax is passed through at an average rate of 97%, leading to a 34% price increase. Demand in the taxed area decreases by 46% in response to the tax. Cross-shopping to stores outside of Philadelphia offsets more than half of the reduction in sales in the city and decreases the net reduction in sales of taxed beverages to only 22%. There is no significant substitution to bottled water and modest substitution to untaxed natural juices. The authors show that tax avoidance through cross-shopping severely constrains revenue generation and nutritional improvement, thus making geographic coverage an important policy decision.

Original languageEnglish (US)
Pages (from-to)22-49
Number of pages28
JournalJournal of Marketing Research
Volume58
Issue number1
DOIs
StatePublished - Feb 2021

Keywords

  • pass-through
  • policy evaluation
  • sin taxes
  • tax avoidance
  • tax design

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Marketing

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