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Soft Drink Suppliers Try to Blunt the Blow of Soda Taxes

FRIDAY, Nov. 4, 2016 -- Suppliers try to counter the effects of taxes on soda and other sugar-sweetened drinks by absorbing some of the extra cost themselves, a new study finds.

These taxes are seen by some as one way to combat the obesity epidemic in the United States, because it's believed price increases would discourage people from buying the products.

On Nov. 8, the California cities of Albany, Oakland and San Francisco, as well as Boulder, Colo., will be voting on whether to institute soda taxes.

In the study, researchers analyzed the effect of a soda tax implemented in Berkeley, Calif., in early 2015. It requires soda distributors to pay the city 1 cent per ounce whenever they deliver soda to a store, which works out to an extra 20 cents for a 20-ounce bottle, and $1.44 for a 12-pack of 12-ounce cans.

But the prices paid by consumers rose by only 43 percent of the tax.

However, "the limited price increase resulting from the tax should not be seen as a failure, but as evidence that consumers are responding to the policy," said study author John Cawley. He is a professor of policy analysis and management and of economics at Cornell University in Ithaca, N.Y.

The tax in Berkeley was the country's first on sugar-sweetened beverages for public health purposes.

In the study, the researchers also found that the closer a store was to an untaxed rival outside of Berkeley, the less it passed the taxes on to consumers.

"Our research suggests that these taxes may be only partially passed on to consumers in the form of higher prices," Cawley said in a university news release.

Because consumers are sensitive to price, suppliers don't want to shift all of the tax to consumers, he explained.

The study was published recently in the Journal of Policy Analysis and Management.

More information

The U.S. Centers for Disease Control and Prevention encourages consumers to rethink your drink.

Posted: November 2016


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