Are Soda Taxes Canning Consumption: New AAEA Member Research

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How consumers are responding to controversial new tax on sugary drinks

One of the key things about these taxes is how people respond to them socially.

The “soda tax” is becoming a popular budget tool across the country, but isn’t becoming any less controversial as more cities propose and pass laws that charge more for sweetened beverages.

Cook County, Illinois, passed a soda tax this year, but the public backlash was so intense government officials decided earlier this month to can the tax. The Michigan State Senate recently voted to ban local governments from passing soda taxes statewide.

But in places like Philadelphia, and Berkeley, California, soda taxes are in effect – adding one penny per ounce to the price of sugary drinks. What are the impacts of these taxes when it comes to consumption? Jakina Debnam of Cornell University put the Berkeley tax, passed in 2014, under the microscope in her paper “Selection Effects and Heterogeneous Demand Responses to the Berkeley Soda tax Vote.” The paper was selected to appear in the American Journal of Agricultural Economics.

“One of the key things about these taxes is how people respond to them socially,” Debnam said. “In many cases people will try to act in defiance. If an authority comes in and says ‘don’t do it’ some people will do it more.”

So are people drinking more soda in response to the soda tax? Debnam found one major factor is how much soda people were drinking before the tax went into effect. That’s one of many elements besides price Debnam says is important for policy makers to look at when they are discussing a soda tax.

For more information on this new soda tax research, and to set up an interview, please contact Jay Saunders in the AAEA Business Office.

ABOUT AAEA: Established in 1910, the Agricultural & Applied Economics Association (AAEA) is the leading professional association for agricultural and applied economists, with 2,500 members in more than 20 countries. Members of the AAEA work in academic or government institutions as well as in industry and not-for-profit organizations, and engage in a variety of research, teaching, and outreach activities in the areas of agriculture, the environment, food, health, and international development. The AAEA publishes two journals, the American Journal of Agricultural Economics and Applied Economic Perspectives & Policy, as well as the online magazine Choices. To learn more, visit http://www.aaea.org.

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Jay Saunders
AAEA
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