The unintended consequences of a tax on soft drinks

What happens if half of the population of a small city faced a 10% tax on soft drinks, whilst the other half didn’t?

Well, according to the results of a six-month field investigation carried out by researchers at Cornell University (Wansink et al.) there was no major change in consumption behaviour – although some interesting unintended consequences of the tax did come to light.

The 10% tax did result in an initial short-term decrease in soft drink purchases – in the first month. But there was no decrease in purchases over a 3-month or 6-month period. What is more interesting however, is that in beer-purchasing households, the tax led to increased purchases of beer.

The research found that there are no significant differences in volumes of sugar-sweetened soft drinks or fruit juices between households paying the additional 10% tax and those not. There was also no significant change in calories purchased between frequent and infrequent buyers taking into consideration any substitutions consumers made, including beer-purchasing households who purchased more beer.

The study illustrates how responses in demand to taxes on foods are not well understood, citing other research pointing to the need for tax limits to be significantly higher to have any impact, and research that suggest that substitutions and compensation occurs that moderates any impact.

Overall, Wansink et al. conclude that “taxes on energy-dense foods may not be as effective an anti-obesity strategy as some have projected.”

You can download the paper and find out more about Wansink and the other authors by following this link.