Soda Taxes and Purchases: Evidence from Household Scanner Data

Soda taxes are increasingly being considered as a potential policy instrument for reducing soda consumption and obesity rates in the U.S. This paper examined the effect of sales taxes on sugar-sweetened soda purchasing at household-level using scanner purchase data for 166,000 households from A.C. Nielsen Homescan data for the second quarters of 2010-2012 and state-level variations in food and beverage sales taxes across the U.S.

The results show that sales taxes had a statistically significant but small association with household soda purchases with estimated tax elasticity of demand at about -0.11. If all states increased their sales taxes so that soda purchases are “disfavored” in relation to other food purchases, the maximum disfavored tax rate of 7% (from the current average of 4%), household purchases of regular soda would decrease by about 6%. Larger soda taxes, such as the recently proposed taxes in the range of 20%, have the potential to substantially reduce household purchasing and consumption of sugar-sweetened soda.