The Impact of the Philadelphia Beverage Tax on Prices, Household Purchases, and Child and Adult Consumption

Several cities in the U.S. have implemented taxes on sugar-sweetened beverages in an attempt to improve public health as well as raise revenue. On January 1, 2017, Philadelphia became the largest U.S. city to implement a beverage tax, which is 1.5 cents per ounce and applies to both caloric and non-caloric but artificially sweetened beverages. In this paper, we estimate the impact of the tax on retail prices, marketing, purchases, and child and adult consumption of taxed and potential substitute beverages.

The study includes an innovative nested data collection approach in which we collected: (1) prices and marketing from retailers, (2) purchase information from customers exiting the retailers, and (3) a follow-up household survey of those customers regarding household and child beverage purchases and consumption. We collected the information from a representative group of retailers and their consumers in Philadelphia and a matched group of retailers in surrounding counties that serve as a control group. We collected the information in the months prior to the implementation of the tax and again a year later. In addition, we examine detailed receipt data on beverage purchases in the six months prior to and after implementation of the tax for a sample of households in Philadelphia as well as for two control groups: residents in surrounding counties and a national matched comparison group.

We use a difference-in-differences identification strategy to estimate the impact of the tax on prices, marketing, purchases, and consumption of taxed beverages. We also estimate the impacts on untaxed beverages to assess potential substitution by consumers. In addition, we examine differential impacts by proximity to the city border to determine whether spillover effects might dampen the impact on prices close to the border and whether residents increase travel across city borders to purchase beverages after the tax. Furthermore, we examine whether taxes have different impacts on prices and marketing by store type, brand, and beverage container volume, and whether the impacts on purchases and consumption vary by household income, age of the child, race, and ethnicity. Taken together, the findings illuminate how the tax in Philadelphia affected prices and how the changes in prices affected purchases and consumption.