The Impact of the Cook County, IL, Sweetened Beverage Tax on Beverage Prices
Lisa M. Powell, Julien Leider, Pierre Thomas Leger´
PII: S1570-677X(19)30223-0
DOI: https://doi.org/10.1016/j.ehb.2020.100855
Reference: EHB 100855
To appear in: Economics and Human Biology
Received Date: 7 August 2019
Revised Date: 19 January 2020
Accepted Date: 20 January 2020
Please cite this article as: Powell LM, Leider J, Leger PT, The Impact of the Cook County, IL,´ Sweetened Beverage Tax on Beverage Prices, Economics and Human Biology (2020), doi: https://doi.org/10.1016/j.ehb.2020.100855
This is a PDF file of an article that has undergone enhancements after acceptance, such as the addition of a cover page and metadata, and formatting for readability, but it is not yet the definitive version of record. This version will undergo additional copyediting, typesetting and review before it is published in its final form, but we are providing this version to give early visibility of the article. Please note that, during the production process, errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.
© 2019 Published by Elsevier.
The Impact of the Cook County, IL, Sweetened Beverage Tax on Beverage Prices
Lisa M. Powell, PhD
Division of Health Policy and Administration
School of Public Health, University of Illinois at Chicago
Chicago, IL
Julien Leider, MA
Institute for Health Research and Policy
University of Illinois at Chicago
Chicago, IL
Pierre Thomas LΓ©ger, PhD
Division of Health Policy and Administration
School of Public Health, University of Illinois at Chicago
Chicago, IL
JEL Classification: I12, I18
*Corresponding author: Lisa M. Powell, Health Policy and Administration (MC 923), Rm. 777, School of Public Health, University of Illinois at Chicago, 1603 W Taylor St. Chicago IL 60612-4393. Tel: 312 413 3544. Email: powelll@uic.edu
Highlights
• The tax pass-through rate for the Cook County, IL, Sweetened Beverage Tax was 119%
• The tax pass-through rate was higher for individual- versus family-size beverages • On average, the Cook County Sweetened Beverage Tax increased prices by 34%
ABSTRACT
This study assessed the extent to which the Cook County, IL, Sweetened Beverage Tax (SBT) of one cent per ounce (oz) on sugar-sweetened and artificially sweetened beverages was passed on to consumers in the form of higher prices. We drew on UPC-level store scanner data and used a pre-post intervention-comparison site difference-in-differences (DID) study design to estimate the impact of the Cook County SBT on prices of taxed beverages, across product categories and sizes, as well as on prices of non-taxed beverages. The DID model results showed an overshifting of the tax with a 119% pass-through rate, on average, across all taxed beverages in Cook County compared to its comparison site. This price change represented, on average, a 34% increase in prices of taxed beverages. For non-taxed beverages, prices were estimated to increase slightly by 0.04 cents per oz driven mainly by an increase in milk prices (0.12 cents per oz). We also found some heterogeneity in tax pass-through for the taxed beverages by sweetened beverage product category and size with pass-through being higher, on average, for individualsize (126%) compared to family-size (117%) beverages and higher for energy drinks (145%) compared to other sweetened beverages. Based on the baseline prices of different categories and sizes of beverages, the effective percentage increase in beverage prices resulting from the Cook County SBT ranged from a 52% increase in prices for family-size soda to a 10% increase for family-size energy drinks.
Key words: sweetened beverage tax; tax pass-through; tax policy; fiscal policy
Introduction
Sugar-sweetened beverage (SSB) consumption is directly linked to obesity and independently associated with adverse health outcomes such as type 2 diabetes, cardiovascular disease, dental caries, and osteoporosis (Malik, Pan, Willett, & Hu, 2013; Malik, Popkin, Bray, DesprΓ©s, & Hu, 2010; Vartanian, Schwartz, & Brownell, 2007). Given health risks associated with SSB consumption and, the fact that SSBs are a significant source of added sugar in American diets (Reedy & Krebs-Smith, 2010) (with half of U.S. adults and 60% of U.S. youths consuming at least one SSB on a given day in 2013-14) (Bleich, Vercammen, Koma, & Li, 2018), SSB taxes are increasingly proposed and implemented as a policy instrument to improve health outcomes. In line with national and international organizations’ recommendations (Institute of Medicine &
Committee on Accelerating Progress in Obesity Prevention Food and Nutrition Board, 2012;
Muth et al., 2019; World Health Organization, 2016), more than 40 countries and eight local
U.S. jurisdictions have implemented some type of tax (University of North Carolina Global Food Research Program, 2019) specifically targeting sweetened beverages. In the U.S. specifically, sweetened beverage taxes have varied on multiple dimensions including: (i) the range of products targeted from SSBs, to both SSBs and artificially sweetened beverages (ASBs), (ii) the point of levy from the distributor to the consumer at the point-of-sale, and (iii) the magnitude (from one to two cents per ounce (oz)) (Center for Science in the Public Interest, 2018).
If the goal of a tax policy is to reduce consumption of a particular good, then the tax must be passed on to consumers in the form of higher prices. The tax incidence, that is, the extent to which consumers versus producers/sellers bear the burden of the tax depends on the price elasticity (responsiveness) of demand and supply (Fullerton & Metcalf, 2002). In the presence of price-insensitive demand, the entire amount of the tax is passed on to consumers and leads to no effect on quantity demanded and sold. Although such a setting may be ideal for raising tax revenue, it is not conducive for reducing consumption. In settings with elastic demand and supply, excise taxes generally lead to some (but not 100%) pass-through (i.e., a sharing of the tax burden by consumer and producers) and lower consumption – where the level of pass-through is decreasing in consumer price elasticity. The extent to which consumers are able to avoid taxes, say through cross-border shopping, can impact the elasticity of demand measure and, in turn, tax pass-through. Indeed, with respect to sweetened beverage taxes in local U.S. jurisdictions, there is, in fact, evidence of cross-border shopping (Roberto et al., 2019) and evidence showing that tax pass-through is relatively lower in stores located closer to the border of the taxing jurisdiction (Cawley & Frisvold, 2017). Additionally, in settings with less than perfectly competitive markets, such as oligopoly markets, taxes may actually lead to over-shifting (Bonnet & RΓ©quillart, 2013; Fullerton & Metcalf, 2002). Thus, given that the extent of the pass-through depends on both consumer demand and market structure, empirical studies on tax incidence for health behaviors such as tobacco have found both under-shifting (i.e., less than 100% passthrough) and over-shifting (i.e., more than 100% pass-through) (Hanson & Sullivan, 2009; Harding, Leibtag, & Lovenheim, 2012).
An increasing number of studies have assessed pass-through of taxes on sweetened beverage prices. Internationally, evidence has revealed partial to full pass-through of the soda tax in France (Berardi, Sevestre, TΓ©paut, & Vigneron, 2016); over-shifting when SSB taxes increased and under-shifting when SSB taxes decreased in Denmark (Bergman & Hansen, 2016); partial to full pass-through of the SSB tax in Mexico including over-shifting for soda (Colchero et al., 2015; Grogger, 2017); and, under-shifting of the SSB taxes in Barbados (Alvarado et al., 2017) and Chile (Caro et al., 2018; Nakamura et al., 2018). In the U.S., a study of the Berkeley, CA, penny per oz SSB tax found that 47% of the tax was passed on to consumers, with slightly higher pass-through for soda (69%), and some differences by store type, when compared to non-taxed sites at three-months post tax (Falbe, Rojas, Grummon, & Madsen, 2015). Similarly, another study found that taxed SSB prices rose, on average, by just under half the amount of the tax after three months (Cawley & Frisvold, 2017). At one year post-tax in Berkeley, another study found varying pass-through across store types with: full pass-through in supermarkets, over-shifting in small chain supermarkets and chain gas stations, under-shifting in pharmacies, and no change in prices in independent small stores (Silver et al., 2017). Heterogeneity by store type also was found in a recent study based on store scanner data on the effect of the 1.5 cents per oz tax on both SSBs and ASBs in Philadelphia, PA, with full tax pass-through in pharmacies (104%) but partial pass-through in supermarkets (43%) and mass merchandise stores (58%) (Roberto et al., 2019) which differs to the pattern found by store type for Berkeley (Falbe et al., 2015; Silver et al., 2017). Using data from airport terminal stores located both within and outside Philadelphia’s city limits, another study found almost complete (93%) tax pass-through (Cawley, Willage, & Frisvold, 2018). Similarly, another study based on store audits in “taxed” Philadelphia compared to “non-taxed” neighboring communities, found full tax pass-through (Cawley, Frisvold, Hill, & Jones, 2018). A study also using store audits but examining the sweetened beverage tax that covered both SSBs and ASBs in Cook County, IL, found over-shifting of the tax (114%) onto beverage prices relative to prices in comparison area stores (Leider, Pipito, & Powell, 2018). Examining the largest SSB tax to date in the U.S. of two cents per oz in Boulder, CO, a recent study found that, compared to two non-taxed communities, the estimated tax pass-through was
79% at one-month post tax and remained roughly constant through three-months post tax
(Cawley, Crain, Frisvold, & Jones, 2018). Finally, a recent evaluation report of Seattle’s Sweetened Beverage Tax, based on store audit data, found that at six-months post-tax the 1.75 cents per oz tax was almost (97%) fully passed through to consumers (Public Health-Seattle and King County, 2019).
The aforementioned studies provide valuable insight on the empirical relationship between taxes on sweetened beverages and consumer prices (i.e., tax pass-through) across store types, product categories, and geographies, in a setting where taxes were levied mostly at the distributor level. This study is the first to use UPC product-level store scanner data to assess tax pass-through of a point-of-sale tax, which was implemented on both SSBs and ASBs: the Cook County, IL, Sweetened Beverage Tax (SBT). Specifically, in November 2016, the Cook County, IL, Board of Commissioners passed the Cook County SBT Ordinance, which would impose a tax at the rate of one cent per oz on the retail sale of sugar- and artificially-sweetened beverages to be applied at the point of sale (i.e., at the cash register) (Cook County Illinois, 2016). The SBT was in effect from August 2, 2017 to November 30, 2017; it was repealed by the Cook County Board of Commissioners, effective December 1, 2017 (Cook County Illinois, 2017).
Different from other recently implemented sweetened beverage taxes in the U.S., the Cook County tax was levied on consumers rather than distributors and thereby applied at the point of sale. Although there were provisions in the Cook County Ordinance to require retail outlets to indicate the tax amount at the shelf, this was not enforced during the four months that the tax was in place. This is of interest since there is some evidence to suggest that pass-through may differ based on whether taxes are imposed at the point-of-purchase (i.e., retail level) compared to those levied on the distributor (and, incorporated into the shelf price) based on saliency and compliance across the different types of taxes (Kopczuk, Marion, Muehlegger, & Slemrod, 2016;
Zheng, Huang, & Ross Jr, 2019). Additionally, besides Philadelphia’s tax, the Cook County, IL, SBT is the only other sweetened beverage tax applied to both ASBs and SSBs, minimizing consumers’ ability to substitute away from taxed beverages to their non-taxed counterparts.
This study uses UPC-level price data over the entire four-month period in which the 2017 tax was in place. We implement a pre-post intervention-comparison site difference-in-differences (DID) study design to estimate the impact of the Cook County, IL, SBT on prices of taxed beverages, across product categories and sizes, as well as on prices of non-taxed beverages.
Methods
Data
Retail scanner data on sales of non-alcoholic beverages were obtained from Nielsen. The weekly data included the total units sold and dollar amount of sales for each UPC at the site level. The data used were based on custom geocoding of store outlets that exactly match the boundaries of the taxing jurisdiction within Cook County, IL, (referred to hereafter as Cook County) and the comparison site, St. Louis City and County, MO (referred to hereafter as St. Louis). St. Louis, MO, was selected as the comparison site for Cook County, IL, based on the following characteristics: population size, median household income, the percent of the population below 125% of the poverty line, the percent of the population that was non-Hispanic black, the percent of the population that was Hispanic, and the percent voting Democratic in the 2016 election.
The data covered supermarkets, grocery stores, convenience stores (including some non-chain convenience stores), drug stores, mass merchandise stores, and dollar stores. Except in the case of store openings and closures, data were based on the same set of stores over time. Where a store closed, it was replaced with a similar store in the same area. The Nielsen store data’s coverage of total beverage sales was extremely high. The volume of taxed beverages in Cook County from the sales data covered in our sample (prorating two weeks of data in which the tax was only in effect for part of the week) corresponded to 59% of total revenue from the tax (Chriqui, Pipito, & Powell, 2018). This constitutes a conservative estimate of Nielsen data coverage for all SSB and ASB sales given that the data do not include sales from full-service or fast-food restaurants. A back of the envelope calculation, based on the estimation that approximately 64% of SSB calories among adults are purchased from supermarkets/grocery stores or convenience stores (An & Maurer, 2016), suggests that our Nielsen sample coverage may be as high as 92% of all store purchases.
The analytic sample included data on sales for the 16 weeks from August 6, 2017 to November
25, 2017 (i.e., the full weeks for which the Cook County SBT was in effect), and the corresponding weeks in 2016 (i.e., August 7, 2016 to November 26, 2016) for each site. The sample consisted of 13,015 distinct beverage UPCs sold within the boundaries of the taxing jurisdiction of Cook County and its comparison site of St. Louis during that time period. The analyses focused on ready-to-drink beverages and excluded powdered drink mixes, frozen juices, fountain drink syrups, and energy shots. A small number of beverages for which the beverage size in fluid oz was not available were not included in the analysis. Juices with indeterminate sweetened/unsweetened status (124 UPCs representing 1.34% of juice volume), and unsweetened sports drinks, energy drinks, and tea/coffee (202 UPCs, 0.30% of total volume) were excluded. Soda, sports drinks, energy drinks, and tea/coffee with indeterminate sweetened/unsweetened status were assumed to be taxable (40 UPCs, 0.03% of remaining total volume). A balanced sample was used, which excluded UPCs that were not sold in one of the four site/year combinations (8,236 UPCs, representing 10.05% of the remaining volume). The final analytical sample included 2,840 taxed and 1,613 untaxed UPCs (representing 89.53% of the original volume).
Measures
The average price per oz for each unique UPC within each combination of site and year was computed by dividing the total sales in dollars by the total volume sold in fluid oz over the entire 16-week period. The scanner data provide sales for each product sold at the UPC level scanned at the point of sale but do not include taxes added separately at the register such as the SBT. Therefore, to compute post-tax prices in Cook County, the SBT was added to the UPC price per oz measure based on volume for each beverage that was subject to the tax. Beverages were classified by category and sweetened status based on beverage brand characteristics from the
Nielsen data, Label Insight, the United States Department of Agriculture Food Composition
Databases, and Internet research (Open Food Facts, 2018; United States Department of Agriculture & Agricultural Research Service). Taxed beverages were categorized as soda, sports drinks, energy drinks, tea/coffee, and juice drinks. Untaxed beverages were categorized as water, milk, and unsweetened juice (which was generally 100% juice). Among unsweetened juices, where the percent of juice was available in the Nielsen data (82% of juice volume), 97% of volume was from 100% juice. Unsweetened juice also included some non-100% juice products, such as unsweetened juices with sparkling water. Finally, beverages were categorized as individual-size (single items ≤ 1 liter (L) in volume) or family-size (multi-packs or single items > 1 L in volume).
Statistical Analysis
Mean average prices were computed across UPCs by site and year. UPC-level DID linear regressions were estimated to assess changes in price, pre-post intervention (16-week period in 2017 compared to same 16-week period in 2016), between the intervention and comparison sites controlling for beverage category and size. Robust standard errors were clustered at the UPC level. All analyses were weighted to reflect the volume sold by UPC in Cook County, St. Louis, and the 2-mile buffer areas surrounding them, from June 2016 to May 2017.
Specifically, we estimated a DID regression model as follows:
πππ π‘ = πΎ0 + πΎ1πππ π‘π‘ππ₯π‘ + πΎ2πΆππππ + πΎ3πππ π‘π‘ππ₯π‘ ∙ πΆππππ + πΎ4ππ + πππ π‘ (1)
where Yist is the price per oz in cents for beverage UPC i, in site s at time period t. Posttaxt is a binary indicator for the post-intervention time status (i.e., 4-month time period after the tax was implemented). Cooks is a binary indicator for whether the beverage product was sold in the intervention site of Cook County. Xi is a vector of characteristics for beverage UPC i including beverage type (soda, sports drinks, energy drinks, tea/coffee, juice drinks, water, milk, and unsweetened 100% juice) and beverage size (individual-size [single items ≤1 L in volume] or family-size [multi-packs or single items >1 L in volume]). The Ξ³3 coefficient on the interaction term estimates the effect of the SBT on the average change in price pre- to post-tax in Cook County relative to the change in the comparison site of St. Louis.
To provide further evidence of the suitability of St. Louis as a comparison site in order to identify the impact of the tax, we examined whether the trends in prices in Cook County and St. Louis were parallel in the pre-tax period. To test parallel trends across the two sites, linear regressions with robust standard errors were estimated using weekly data on volume-weighted mean prices of UPCs sold in the weeks ending June 4, 2016 through May 27, 2017 (i.e., the year before the tax went into effect while excluding the month immediately before the tax was scheduled to take effect). These regressions included terms for site and month as well as site-bymonth interactions. Wald tests were conducted to examine whether the site-by-month interactions were jointly equal to zero. The tests of parallel trends revealed no significant differences in price trends of taxed (p=0.27) or untaxed (p=0.96) beverages in the two sites in the year prior to the tax. Parallel trends are presented graphically (Figures 1-6) in the pre-tax period for taxed and untaxed beverages including by size.
Analyses in this paper were conducted in Stata/SE 15.1.
Results
Table 1 reports unadjusted beverage prices for both Cook County and St. Louis for pre-tax (16week baseline period in 2016) and post-tax (corresponding 16-week period in 2017 during which the tax was in place) periods. Mean, and changes in, prices are reported for taxed and non-taxed beverages in general and by category and size. At baseline, the mean price of taxed sweetened beverages were 3.45 cents per oz and 3.58 cents per oz in Cook County and St. Louis, respectively. In both sites, the price per oz for sweetened beverages was substantially lower for family-size compared to individual-size formats (2.68 cents per oz versus 7.05 cents per oz in Cook County and 2.84 cents per oz versus 7.06 cents per oz in St. Louis). Similar patterns by size held for the untaxed beverages. In both sites, the lowest priced sweetened beverage type was soda (2.68 cents per oz in Cook County and 2.83 cents per oz in St. Louis) while the most expensive was energy drinks (13.60 cents per oz in Cook County and 13.61 cents per oz in St. Louis). The lowest priced beverage overall was water (1.17 cents per oz in Cook County and 1.22 cents per oz in St. Louis). The summary statistics show that unadjusted mean prices of taxed beverages rose 1.21 cents per oz in Cook County and 0.03 cents per oz in St. Louis from 2016 to 2017. Prices of untaxed beverages remained largely unchanged with a 0.02 cents per oz increase in Cook County and a 0.03 cents per oz decrease in St. Louis. Figures 1-6 show the weekly volume-weighted mean price of taxed and untaxed beverages overall and by size in Cook County and St. Louis before and after tax implementation.
Table 2 reports results from our DID model of the impact of the SBT on beverage prices in the intervention site of Cook County compared to its comparison site of St. Louis for taxed and untaxed beverages overall as well as by beverage type and size. The results from Table 2 show that the price of taxed beverages rose by 1.19 cents per oz in Cook County relative to St. Louis, and that this increase was statistically significant at the 0.1% level. Based on the 1-cent/oz tax, this reflects a more than full tax pass-through of 119%. We found consistently greater than full tax pass-through across all taxed beverage types. There was some heterogeneity in the estimates which ranged from 109% for sports drinks to 145% for energy drinks, but for the most part the estimates by beverage type were similar. Tax pass-through was higher for energy drinks compared to all other beverage types. There was also some heterogeneity by size where passthrough was higher, on average, for individual-size (126%) compared to family-size (117%) beverages. Differences were more evident by beverage type and size, where higher pass-through was found for the individual- versus family size for energy drinks (163% versus 112%), tea/coffee (141% versus 111%), and juice drinks (138% versus 115%).
For untaxed beverages, DID estimates suggest a small increase in price of 0.04 cents per oz, which was mostly driven by a price increase in milk (0.12 cents per oz). There were no statistically significant changes in the overall price per oz of water or unsweetened juice. By size, the tax was estimated to increase prices of untaxed beverages by 0.18 cents per oz for individualsize water compared to a non-significant effect for family-size water and by 0.12 cents per oz for family-size milk compared to a non-significant effect for individual-size milk.
Based on DID estimates from Table 2, Table 3 summarizes the effective percentage increase from baseline in mean prices for the intervention site across taxed beverage categories and sizes. The 1.19 cent per oz increase in the price of taxed beverages represented a 34% increase, on average, in prices. Because family-sized soda had the lowest price per oz among sweetened beverages, the tax pass-through of 1.19 cents per oz for such products effectively raised prices by 52%. In contrast, individual-size energy drinks had the highest pass-through at 163%, yet such an increase translated into only an 11% increase in prices as the mean price of individual-size energy drinks was the most expensive at 14.97 cents per oz. The SBT resulted in the lowest effective percentage price increase for family-sized energy drinks with, on average, a 10% increase.
Discussion
This study provided the first evidence of the extent of tax pass-through of the point-of-sale Cook County SBT using UPC-level store scanner data covering the full range of beverage products sold in stores. The DID results showed an over-shifting of the tax with a 119% pass-through rate, on average, across all taxed beverages in Cook County relative to its comparison site of St. Louis. This price change represented, on average, a 34% increase for taxed beverages from baseline during the same 4-month period of the previous year. For non-taxed beverages, prices were estimated to increase slightly which was driven mainly by an increase in milk prices.
Our results of slightly more than full tax pass-through points to Cook County consumers bearing the full burden of the SBT. This is in contrast to previous studies for Berkeley and Boulder that found, on average, only partial tax pass-through within the first six months (Cawley, Crain, et al., 2018; Cawley & Frisvold, 2017; Falbe et al., 2015; Silver et al., 2017). The results are similar with two Philadelphia studies which found full tax pass-through (at one and twelve months posttax) as well as a recent report from Seattle that found 97% tax pass-through at six months (Cawley, Frisvold, et al., 2018; Cawley, Willage, et al., 2018; Public Health-Seattle and King County, 2019). Our results differ somewhat to the recent study for Philadelphia that also used store scanner data which found full tax pass-through in pharmacies, but only partial pass-through for supermarkets and mass merchandise stores (Roberto et al., 2019). Finally, the results in this study are consistent with the only other study to date of tax pass-through for Cook County which, based on store audit data, also found that the SBT was slightly over-shifted with a tax pass-through of 114% (Leider et al., 2018).
Our results also suggest some heterogeneous effects when it comes to tax pass-through across product categories and sizes. For taxed beverages, we found that tax pass-through was slightly higher, on average, for individual-size (126%) compared to family-size (117%) formats, which would suggest that consumers were less price sensitive for smaller single formats than for family-size ones. This finding, however, was not consistent across beverage categories as there were no differences in pass-through for soda or sports drinks by size. There does not appear to be a consistent pattern by product category and size in the literature either. For example, several Berkeley studies (Cawley & Frisvold, 2017; Falbe et al., 2015) found similar pass-through across sizes for soda but a Philadelphia study found greater pass-through for small sizes in the soda category (Cawley, Frisvold, et al., 2018). A recent study that assessed pass-through for soda, energy drinks, sports drinks, and iced tea in Boulder found similar tax pass-through of about 75% across various sizes (20 oz, 2L and 12-packs of 12 oz) of the taxed beverages (Cawley, Crain, et al., 2018).
By product category, tax pass-through was found to be higher for energy drinks (145%) compared to other sweetened beverages. This could reflect a relatively inelastic demand for energy drinks. However, it is not necessarily inconsistent with the literature that reports elastic demand for energy drinks (in the range of -1.3 to -2.4) (Zhen, Finkelstein, Nonnemaker, Karns, & Todd, 2014; Zhen, Wohlgenant, Karns, & Kaufman, 2011), given that, due to its high cost per oz, the pass-through represents a much smaller effective tax rate for energy drinks (11% increase in price) than for all taxed beverages (34% increase in price).
While this study contributes to the literature with its extensive coverage of store sales and the universe of UPC-level products sold in those stores, it is nonetheless subject to several limitations. First, because we obtained scanner data available from the full set of retailers covered by Nielsen, the data were protected for confidentiality based on store name, type and location. As a result, while we have extensive market coverage, we were not able to stratify our analyses by store type which has been shown to have differential levels of pass-through (Cawley, Frisvold, et al., 2018; Falbe et al., 2015; Public Health-Seattle and King County, 2019; Roberto et al., 2019; Silver et al., 2017). Second, for similar reasons, we could not identify how passthrough varied by distance to the border (i.e., closer to non-taxed competitors). Distance to the border has been shown to be important in Berkeley, CA, with pass-through being lower in retail outlets closer to the border (Cawley & Frisvold, 2017; Cawley, Frisvold, et al., 2018). Third, because we computed the post-tax price measure based on the assumption that retailers were in full compliance in applying the tax at the register, we may have over-estimated tax pass-through if stores did not correctly apply the tax at the point of purchase. Evidence from a recent study that assessed compliance with the Cook County SBT based on receipts from a sample of selected taxable (soda and juice drinks) and non-taxable (100% fruit juice and sparkling water) food store audit purchases found that overall 91.0% of beverages purchased were taxed correctly (87.8% of taxable beverages were taxed correctly and 97.3% of non-taxable beverages were taxed correctly) (El-Sayed, Pipito, Leider, Chriqui, & Powell, 2019). Of note, the tax was applied correctly for 85.5% of beverages in limited service stores compared to 100% correct application in supermarkets and grocery stores (El-Sayed et al., 2019). Fourth, our analysis was limited to assessing the average impact on prices during the 16-week period for which the Cook County
SBT was in effect and we did not assess dynamic impacts during this short-run period. Finally, since this study included one intervention site and one comparison site our standard errors may be underestimated (Cameron & Miller, 2015). This limitation has been noted previously in an evaluation of SSB tax pass-through (Cawley & Frisvold, 2017).
Despite these limitations, our study provides important evidence on the tax incidence of a sweetened beverage point-of-sale tax which covered both SSBs and ASBs using rich data that included the near universe of UPC-level store sales with comparison site. This paper showed that the Cook County SBT was slightly over-shifted to consumers. It also revealed that there were limited changes in prices of non-taxed beverages. Tax pass-through was found to be higher for energy drinks and individual- versus family-size beverages. In addition, it highlighted the importance of assessing the pass-through evidence in the context of baseline prices. Indeed, differences across beverage types and sizes in the price per oz revealed substantial differences in the effective percentage increase in beverage prices which ranged from 52% for family-size soda to 10% for family-size energy drinks. These results suggest that the net impact of a one cent per oz tax on sales of beverages will vary greatly depending on the size and product category. More specifically, our results suggest substantial impacts on family-size soda purchases yet limited effects for energy drinks (despite their higher than average tax pass-through rate). In comparing our study findings to those for other U.S. localities, a number of differences were shown to exist not only in the overall rate of pass-through but also by beverage type and size, which may be driven by local market conditions, data, and study design. Evidence on tax pass-through of beverage taxes is critical in all tax evaluations for understanding expected impacts on sales and related consumption and health outcomes.
Funding: This study was supported by a grant from Bloomberg Philanthropies’ Obesity Prevention Initiative (www.bloomberg.org). The contents of this publication do not necessarily reflect the views or policies of Bloomberg Philanthropies. The funder had no role in study design; in the collection, analysis and interpretation of data; in the writing of the report; or in the decision to submit the article for publication.
References
Alvarado, M., Kostova, D., Suhrcke, M., Hambleton, I., Hassell, T., Samuels, T., . . . Unwin, N. (2017). Trends in beverage prices following the introduction of a tax on sugar-sweetened beverages in
Barbados. Preventive Medicine, 105, S23-S25. doi:10.1016/j.ypmed.2017.07.013
An, R., & Maurer, G. (2016). Consumption of sugar-sweetened beverages and discretionary foods among US adults by purchase location. European Journal Of Clinical Nutrition, 70, 1396-1400.
doi:10.1038/ejcn.2016.136
Berardi, N., Sevestre, P., TΓ©paut, M., & Vigneron, A. (2016). The impact of a ‘soda tax’ on prices:
evidence from French micro data. Applied Economics, 48(41), 3976-3994.
doi:10.1080/00036846.2016.1150946
Bergman, U. M., & Hansen, N. L. (2016). Are Excise Taxes on Beverages Fully Passed Through to Prices? The Danish Evidence. University of Copenhagen, Denmark and Danmarks Nationalbank, Denmark.
Bleich, S. N., Vercammen, K. A., Koma, J. W., & Li, Z. (2018). Trends in beverage consumption among children and adults, 2003-2014. Obesity (Silver Spring), 26(2), 432-441. doi:10.1002/oby.22056
Bonnet, C., & RΓ©quillart, V. (2013). Tax incidence with strategic firms in the soft drink market. Journal of Public Economics, 105, 77-88.
Cameron, A. C., & Miller, D. L. (2015). A practitioner’s guide to cluster-robust inference. Journal of Human Resources, 50(2), 317-372.
Caro, J. C., CorvalΓ‘n, C., Reyes, M., Silva, A., Popkin, B., & Taillie, L. S. (2018). Chile’s 2014 Sugarsweetened Beverage Tax and changes in prices and purchases of sugar-sweetened beverages: an observational study in an urban environment. PLOS Medicine, 15(7), e1002597.
doi:https://doi.org/10.1371/journal.pmed.1002597
Cawley, J., Crain, C., Frisvold, D., & Jones, D. (2018). The pass-through of the largest tax on sugarsweetened beverages: the case of Boulder, Colorado. National Bureau of Economic Research, NBER Working Paper No. 25050.
Cawley, J., & Frisvold, D. (2017). The pass‐through of taxes on sugar‐sweetened beverages to retail prices: the case of Berkeley, California. Journal of Policy Analysis and Management, 36(2), 303326. doi:10.1002/pam.21960
Cawley, J., Frisvold, D., Hill, A., & Jones, D. (2018). The impact of the Philadelphia Beverage Tax on prices and product availability. National Bureau of Economic Research, NBER Working Paper No. 24990.
Cawley, J., Willage, B., & Frisvold, D. (2018). Pass-through of a tax on sugar-sweetened beverages at the Philadelphia International Airport. Journal of the American Medical Association, 319(3), 305-306. doi:10.1001/jama.2017.16903
Center for Science in the Public Interest. (2018). Local sugary drink taxes voted on 2014-2017. Retrieved from https://cspinet.org/sites/default/files/attachment/localsugarydrinks3.pdf
Chriqui, J., Pipito, A., & Powell, L. (2018). Revenue generated from the Cook County, Illinois, Sweetened Beverage Tax in fiscal year 2017. Retrieved from Chicago, Illinois:
https://illinoisprc.org/publications
Colchero, M. A., Salgado, J. C., Unar-MunguΓa, M., Molina, M., Ng, S., & Rivera-Dommarco, J. A. (2015). Changes in prices after an excise tax to sweetened sugar beverages was implemented in Mexico:
evidence from urban areas. PLoS ONE, 10(12), e0144408. doi:10.1371/journal.pone.0144408
El-Sayed, O. M., Pipito, A. A., Leider, J., Chriqui, J. F., & Powell, L. M. (2019). An assessment of food store compliance with the Cook County Sweetened Beverage Tax. Journal of Public Health
Management & Practice, [published ahead of print]. doi:DOI: 10.1097/PHH.0000000000001017
Falbe, J., Rojas, N., Grummon, A. H., & Madsen, K. A. (2015). Higher retail prices of sugar-sweetened beverages 3 months after implementation of an excise tax in Berkeley, California. American
Journal of Public Health, 105(11), 2194-2201. doi:10.2105/AJPH.2015.302881
Fullerton, D., & Metcalf, G. (2002). Tax Incidence. In A. Auerbach & M. Feldstein (Eds.), Handbook of Public Economics (1 ed., Vol. 4).
Grogger, J. (2017). Soda taxes and the prices of sodas and other drinks: evidence from Mexico. American Journal of Agricultural Economics, 99(2), 481-498. doi: 10.1093/ajae/aax024
Hanson, A., & Sullivan, R. (2009). The Incidence of Tobacco Taxation: Evidence from Geographic MicroLevel Data. National Tax Journal, 62(4), 677-698.
Harding, M., Leibtag, E., & Lovenheim, M. (2012). The heterogeneous geographic and socioeconomic incidence of cigarette taxes: evidence from Nielsen Homescan data. American Economic Journal: Economic Policy, 4(4), 169-198.
Institute of Medicine, & Committee on Accelerating Progress in Obesity Prevention Food and Nutrition Board. (2012). Accelerating progress in obesity prevention: solving the weight of the nation (D. Glickman, L. Parker, L. J. Sim, H. D. V. Cook, & E. A. Miller Eds.). Washington, DC: National Academies Press.
Kopczuk, W., Marion, J., Muehlegger, E., & Slemrod, J. (2016). Does tax-collection invariance hold? Evasion and pass-through of state diesel taxes. American Economic Journal: Economic Policy, 8(2), 251-286. doi:10.1257/pol.20140271
Leider, J., Pipito, A. A., & Powell, L. M. (2018). The impact of the Cook County, Illinois Sweetened
Beverage Tax on prices, 2017. Retrieved from Chicago, IL: https://illinoisprc.org/publications
Malik, V. S., Pan, A., Willett, W. C., & Hu, F. B. (2013). Sugar-sweetened beverages and weight gain in children and adults: a systematic review and meta-analysis. American Journal of Clinical
Nutrition, 98(4), 1084-1102. doi:10.3945/ajcn.113.058362
Malik, V. S., Popkin, B. M., Bray, G. A., DesprΓ©s, J.-P., & Hu, F. B. (2010). Sugar-sweetened beverages, obesity, type 2 diabetes mellitus, and cardiovascular disease risk. Circulation, 121(11), 1356-
1364. doi:10.1161/CIRCULATIONAHA.109.876185
Muth, N. D., Dietz, W. H., Magge, S. N., Johnson, R. K., American Academy of Pediatrics, & American Heart Association. (2019). Public policies to reduce sugary drink consumption in children and adolescents. Pediatrics, 143(4). doi:10.1542/peds.2019-0282
Nakamura, R., Mirelman, A., Cuadrado, C., Silva, N., Dunstan, J., & Suhrcke, M. E. (2018). Evaluating the 2014 Sugar-sweetened Beverage Tax in Chile: an observational study in urban areas. PLOS Medicine. doi:10.1371/journal.pmed.1002596
Open Food Facts. (2018). Open Food Facts- United States. Retrieved from https://us.openfoodfacts.org/
Public Health-Seattle and King County. (2019). 6 Month Report: Store audits-the evaluation of Seattle's Sweetened Beverage Tax. Retrieved from
https://www.seattle.gov/Documents/Departments/CityAuditor/auditreports/6%20Month%20St ore%20Audit%20Report%20.pdf
Reedy, J., & Krebs-Smith, S. M. (2010). Dietary sources of energy, solid fats, and added sugars among children and adolescents in the United States. Journal of the American Dietetic Association, 110(10), 1477-1484. doi:10.1016/j.jada.2010.07.010
Roberto, C. A., Lawman, H. G., LeVasseur, M. T., Mitra, N., Peterhans, A., Herring, B., & Bleich, S. N. (2019). Association of a beverage tax on sugar-sweetened and artificially sweetened beverages with changes in beverage prices and sales at chain retailers in a large urban setting. Journal of the American Medical Association, 321(18), 1799-1810. doi:10.1001/jama.2019.4249
Silver, L. D., Ng, S. W., Ryan-Ibarra, S., Taillie, L. S., Induni, M., Miles, D. R., . . . Popkin, B. M. (2017).
Changes in prices, sales, consumer spending, and beverage consumption one year after a tax on sugar-sweetened beverages in Berkeley, California, US: A before-and-after study. PLOS
Medicine, 14(4), e1002283. doi:10.1371/journal.pmed.1002283
United States Department of Agriculture, & Agricultural Research Service. USDA Food Composition Databases. Retrieved from https://ndb.nal.usda.gov/ndb/
University of North Carolina Global Food Research Program. (2019). Sugary drink taxes around the world. Retrieved from
Figure 1. Prices of Taxed Beverages in Cook County, IL, and St. Louis City and County, MO, Before and After Tax Implementation
Figure 3. Prices of Family-Size Taxed Beverages in Cook County, IL, and St. Louis City and County, MO, Before and After Tax Implementation
Figure 5. Prices of Individual-Size Untaxed Beverages in Cook County, IL, and St. Louis City and County, MO, Before and After Tax Implementation
Table 1. Beverage Prices (cents per ounce) in Cook County, IL, and St. Louis City and County, MO, Pre and Post Tax, 2016-2017
Cook County, IL St. Louis City and County, MO
Pre tax Post tax Pre-post Change Pre tax Post tax Pre-post Change
Taxed Beverages (N=11360) 3.45 (0.11) 4.66 (0.11) 1.21 3.58 (0.11) 3.61 (0.11) 0.03
Individual-size (N=5396) 7.05 (0.32) 8.46 (0.35) 1.41 7.06 (0.32) 7.21 (0.33) 0.15
Family-size (N=5964) 2.68 (0.05) 3.85 (0.05) 1.17 2.84 (0.06) 2.84 (0.06) 0.00
Soda (N=3772) 2.68 (0.09) 3.90 (0.09) 1.22 2.83 (0.09) 2.86 (0.09) 0.03
Individual-size (N=1388) 6.93 (0.28) 8.25 (0.29) 1.32 6.82 (0.32) 7.01 (0.34) 0.19
Family-size (N=2384) 2.31 (0.03) 3.51 (0.04) 1.20 2.48 (0.04) 2.49 (0.04) 0.01
Sports Drinks (N=1104) 3.88 (0.13) 5.04 (0.15) 1.16 3.97 (0.13) 4.04 (0.14) 0.07
Individual-size (N=616) 4.28 (0.23) 5.56 (0.27) 1.28 4.39 (0.23) 4.57 (0.25) 0.18
Family-size (N=488) 3.42 (0.08) 4.44 (0.09) 1.02 3.48 (0.08) 3.43 (0.09) -0.05
Energy Drinks (N=1016) 13.60 (0.98) 15.28 (1.08) 1.68 13.61 (0.96) 13.84 (1.01) 0.23
Individual-size (N=764) 14.97 (1.03) 16.97 (1.07) 2.00 14.84 (1.03) 15.22 (1.10) 0.38
Family-size (N=252) 10.94 (1.26) 12.00 (1.34) 1.06 11.23 (1.26) 11.17 (1.23) -0.06
Tea/Coffee (N=1708) 4.42 (0.31) 5.64 (0.33) 1.22 4.47 (0.31) 4.50 (0.31) 0.03
Individual-size (N=1052) 7.40 (0.88) 8.87 (0.93) 1.47 7.37 (0.91) 7.43 (0.88) 0.06
Family-size (N=656) 3.28 (0.19) 4.40 (0.20) 1.12 3.35 (0.20) 3.37 (0.20) 0.02
Juice Drinks (N=3760) 3.52 (0.12) 4.66 (0.12) 1.14 3.67 (0.12) 3.63 (0.12) -0.04
Individual-size (N=1576) 6.44 (0.36) 7.75 (0.36) 1.31 6.59 (0.37) 6.52 (0.35) -0.07
Family-size (N=2184) 3.00 (0.10) 4.11 (0.11) 1.11 3.15 (0.11) 3.11 (0.11) -0.04
Untaxed Beverages (N=6452) 2.08 (0.18) 0.02 2.29 (0.20) 2.26 (0.19) -0.03
Individual-size (N=2616) 8.19 (0.37) 8.47 (0.34) 0.28 7.78 (0.37) 7.92 (0.35) 0.14
Family-size (N=3836) 1.82 (0.15) 1.83 (0.15) 0.01 2.06 (0.18) 2.03 (0.17) -0.03
Water (N=1832) 1.17 (0.11) 1.18 (0.11) 0.01 1.22 (0.11) 1.23 (0.11) 0.01
Individual-size (N=736) 5.85 (0.25) 6.19 (0.26) 0.34 5.64 (0.26) 5.80 (0.26) 0.16
Family-size (N=1096) 0.97 (0.07) 0.97 (0.07) 0.00 1.03 (0.08) 1.03 (0.07) 0.00
Milk (N=1272) 2.80 (0.29) 2.81 (0.32) 0.01 3.34 (0.27) 3.23 (0.31) -0.11
Individual-size (N=360) 8.62 (0.42) 8.63 (0.43) 0.01 6.93 (0.35) 6.85 (0.36) -0.08
Family-size (N=912) 2.67 (0.26) 2.68 (0.29) 0.01 3.26 (0.25) 3.15 (0.30) -0.11
Unsweetened Juice (N=3348) 6.26 (0.29) 6.35 (0.29) 0.09 6.41 (0.29) 6.49 (0.29) 0.08
Individual-size (N=1520) 15.25 (0.59) 15.56 (0.57) 0.31 15.25 (0.60) 15.54 (0.61) 0.29
Family-size (N=1828) 5.26 (0.23) 5.32 (0.23) 0.06 5.42 (0.24) 5.48 (0.23) 0.06
Notes: Estimates are based on data during the 16 tax weeks in 2016 and 2017. Price per ounce (oz) computed for each UPC based on total dollars divided by total volume sold within each site/time period combination. Price shown includes 1c per oz tax in Cook County, IL, in 2017. Estimates shown with standard errors in parentheses. Estimates are weighted based on volume
sold in June 2016 - May 2017. Sample size shown in first column. The sample size is 4*# UPCs. Sample sizes shown are for mean estimation across the two sites and two time periods.
Table 2. Difference-in-differences Estimates from Linear Regression Models Showing Estimated Pre-post Tax Effect on Beverage Prices (cents per ounce), 2016-2017
Table 3. Estimated Effect of Tax Pass-through on Taxed Beverage Prices (cents per ounce (oz)) Relative to Pretax Mean Price per ounce, 2016-2017
Subscribe by Email
Follow Updates Articles from This Blog via Email
No Comments