By Nathan Collins
Four American cities—Boulder, Colorado; and Albany, Oakland, and San Francisco, California—just finished voting on controversial soda-tax ballot measures meant to raise prices, curb consumption, and, hopefully, flatten out the ever-increasing obesity epidemic. There’s early evidence that similar taxes in other cities and countries are working, but exactly how much effect they have can be hard to measure. Now, a new study of Berkeley’s soda tax suggests that, when it comes to the first part of the equation—raising prices—the effect might not be as strong as you’d think.
At first glance, you’d think a tax on soda must automatically raise the prices consumers pay, which, in turn, would reduce sales. But computing the price increase of a bottle of Coke takes several steps, since it’s actually distributors who pay an excise tax on soda, usually one or two cents per ounce. Although those distributors might want to pass the full cost on to retailers—and, in turn, consumers—doing so might hurt sales. For sellers, the question is how much can they raise prices before reduced sales cut into their profits? For researchers, the question is how much soda taxes actually raise consumer prices.