Berkeley Soda Tax Health Gains Could Be Smaller Than Expected
Berkeley's tax on sugar-sweetened beverages -- the first of its kind in the U.S. -- has not increased prices for consumers by as much as expected, according to a study published by the National Bureau of Economic Research, the Daily Caller reports (Bentley, Daily Caller, 8/21).
Berkeley's penny-per-ounce tax took effect on March 1.
The tax generated $116,000 in the first month it was enacted. Berkeley City Council member Linda Maio has estimated that the tax will bring in $1.2 million during the first year (California Healthline, 5/20).
Details of Study
For the study, researchers from Cornell University and the University of Iowa analyzed price data from all of Berkeley's:
- Convenience stores;
- Gas stations;
- Grocery stores;
- Pharmacies; and
They then compared the data with a sample of stores in San Francisco.
According to the study, just 21.7% of the tax was passed to consumers (Daily Caller, 8/21). As a result, retail prices for sugary drinks have increased by less than half the amount officials expected (Boscia, Cornell Chronicle, 8/17).
The study concluded, "These results imply that the Berkeley soda tax, because it is passed through to consumers to a lesser extent than anticipated, will result in less of a reduction in consumption, and thus less health improvement, than anticipated" (Daily Caller, 8/21).
John Cawley, co-author of the study and an economist at Cornell, said, "The reason for this surprising result could be related to the fact that it's a city tax and therefore store owners have to be concerned about the ability of consumers to shop at stores outside of Berkeley," adding, "Concerns about cross-border shopping could contribute to a low pass-through of the tax."
In addition, Cawley said, "There is an economic rationale for taxes when consumption of the good imposes negative externalities, and obesity costs taxpayers billions each year in medical care costs in the U.S." (Cornell Chronicle, 8/17).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.