The Impact of a Soda Tax on Aggregate Consumer Behavior

Abstract

In January of 2017, Philadelphia became the second American jurisdiction to implement a targeted “soda tax”, which added a new tax of 1.5 cents per ounce to sweetened beverages. Revenue from the tax was intended to be used for pre-k education and the rebuilding of parks and recreation centers (Terruso, 2017). As obesity in the United States and around the world continues to be of concern, leaders from across disciplines will be looking to find out if and how consumers change behavior as a result of such taxes. Many communities across the US are currently considering or in the process of implementing adding a similar tax yet existing research is limited and finds conflicting results. The following paper demonstrates the impact of the tax in two different ways. First, transactional data from a convenience store chain was used to review beverage transactional sales before and after the tax. Sales were recorded in Philadelphia, stores immediately outside the border, and remaining stores in the geographical area. Secondly, purchase behavior of consumers in the Philadelphia market before and after the soda tax was implemented was analyzed. This allowed the ability to understand the geographic buying patterns of individuals before and after the tax, as well as any demographic differences in the behavior change. These two studies provide a deeper look into the soda tax impact than exists in the current literature due to the number of locations captured, duration of studies, and consumer-level transactional data.