Social & Education Policy

The Economics of Taxes on Sugar-Sweetened Beverages: A Review of the Effects on Prices, Sales, Cross-Border Shopping, and Consumption

Cawley, J.; Thow, A.Marie; Wen, K.; Frisvold, D.E.
Sep-08-2020

Abstract

During the past decade, dozens of countries, regions, and cities have enacted taxes on sugar-sweetened beverages (SSBs). They have been primarily motivated by a desire to raise prices, reduce sales and consumption, improve population health, and raise revenue. This review outlines the economic rationale for SSB taxes and illustrates their predicted effects. It reviews the research on the effects of these taxes on retail prices, sales, cross-border shopping, consumption, and product availability. The evidence indicates that the amount by which taxes increase retail prices (also called the pass-through of the tax) varies by jurisdiction, ranging from less than 50% to 100% of the tax. Sales tend to decrease significantly in the taxing jurisdiction, although this seems to be partly offset by residents increasingly shopping outside of the taxing jurisdiction (i.e., engaging in cross-border shopping).Overall, taxes lower consumption of the taxed beverages by adults, although not for all types of beverages or all groups of consumers. We conclude with suggestions for improving the design of such taxes and directions for future research.