The Effects of Soda Taxes on Consumption and Health Outcomes in the Short and Long Run

Sugar-sweetened beverages (SSBs) have little nutritive value and add a nontrivial number of calories to diets. Frequent SSB consumption is associated with the incidence of obesity, diabetes, and other health conditions related to the cardiovascular system. Because excessive SSB consumption has a negative health impact, the purchase price of SSBs may not capture the full cost to society. To help internalize this cost, most states apply sales taxes to SSBs and some U.S jurisdictions also levy SSB excise taxes.

Numerous studies have examined the effect of SSB taxes on consumption and obesity and have arrived at mixed conclusions. However, most prior studies have estimated the contemporaneous impact of SSB taxes. A focus on the impact of contemporaneous SSB taxes may be insufficient to capture the entire long-run effect since stages of the relationship—the effect of SSB taxes on SSB consumption and the effect of any resulting change in SSB consumption on health—could occur gradually over time. There are at least two reasons why there may be a lag in the (full) consumption response to a SSB cost change. First, it may take time for some consumers to notice a change in SSB costs or to fully appreciate a cost change relative to their food budgets. Second, consumers may be slow to adjust their intake of SSBs because of the habit-forming nature of SSB consumption. In addition, the short- and long-run impact of SSB taxes may differ because tax shifting from suppliers to consumers may vary over time.

Using 1999-2014 restricted-use National Health and Nutrition Examination Survey (NHANES) data at the state level, we contribute to the literature by analyzing the short- and long-run effect of SSB taxes on caloric intake, body weight outcomes, blood sugar levels, blood cholesterol levels, blood pressure, as well as a metabolic syndrome index. A noteworthy outcome of interest is blood sugar levels since diabetes as an outcome has been studied relatively little in the literature despite it often being cited as a main reason for implementing a SSB tax. Our study will provide an up-to-date analysis of the health impacts of SSB taxes among children, adolescents, and adults, and will shed light on whether and how the sign and size of any health effects of SSB taxes depends on the time horizon of the analysis. The results of our study will help to inform future tax policy-making decisions by showing the importance of the long-run benefits of SSB taxation.