Eight US cities have imposed taxes on sugary drinks, contributing to health problems such as obesity and type 2 diabetes.
New research from the University of Washington investigated responses to sweetened beverage taxes using the purchasing behavior of approximately 400 households in Seattle, San Francisco, Oakland and Philadelphia, all of which recently introduced beverage taxes. The study was published online September 30 in Health Economics.
The researchers found that after the tax was introduced, low-income households reduced their purchases of sugary drinks by almost 50%, while higher-income households reduced their purchases by 18%. Given that previous studies have shown that low-income people consume sugary drinks at higher than average rates, these results suggest that taxes could help reduce health disparities and promote population health.
“If households reduce their sugar consumption, they will experience health benefits,” said Melissa Knox, co-author and associate professor of economics at the University of Washington. “Sugary drinks are one of the biggest sources of sugar in the American diet. They have all kinds of health consequences and don’t really provide any nutrition. The idea with the tax is that low-income people, because they reduce their consumption more, receive greater health benefits than households with higher incomes.
Using Nielsen Consumer Panel, researchers followed households for a year before and after the tax was implemented in their city. Consumers were given a handheld scanner to report their purchases.
The results showed that households experienced price increases for taxed beverages, and the difference persisted for at least a year after tax. Price increases were largest for low-income households: a 22% increase in sugary drink prices versus 11% for higher-income households. After the tax was implemented, low-income households experienced a 47% decrease in sugary drink purchases. The researchers did not see an after-tax increase in cross-border purchases.
“We also looked at duty-free beverages and found that low-income households are substituting duty-free beverages,” Knox said. “They’re using some of their money to buy a different drink, instead of buying a chocolate bar instead of buying a Coca-Cola.”
Policymakers are particularly interested in the response of low-income consumers because of their higher average consumption of sugary drinks and concerns that taxes are regressive.
Previous research from the University of Washington found that low- and high-income households paid about the same amount of the tax, meaning low-income households spent a larger proportion of their income. But the study also showed that more dollars went to funding programs that benefit low-income communities than households that paid taxes. The annual net benefit to low-income communities ranged from $5.3 million to $16.4 million annually in three U.S. cities.
More previous research from the University of Washington found that the tax was also associated with decreases in childhood body mass index among Seattle children compared to a good-looking comparison group.
“Taken together, this body of work suggests that the tax is having 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 professor of health at the University of Washington. systems and population health.
The research was funded by the University of Washington Royalty Research Fund and the Robert Wood Johnson Foundation. Partial support was provided by a research infrastructure grant from the Eunice Kennedy Shriver National Institute of Child Health and Human Development.