Remember That Time Berkeley, California, Tried to Tax Soda? Apparently It’s Not Working Out

Berkeley’s new tax on soda is not having the desired effect: Only 21 percent of soda taxes have been passed on to consumers

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Do soda taxes really fail to have the desired effect?

Although many cities have attempted to pass a city tax on soft drinks, most famously New York, very few have succeeded. In fact, Berkeley, California, was the first-ever city in America to pass a tax on soda. The new law went into effect earlier this year, but researchers have found that the law is less impactful than they thought.

According to a study from economists at Cornell University and the University of Iowa, just 21.7 percent of the tax was actually passed on to consumers, although the tax did generate $116,000 within the first month that it was enacted. The revenue it has generated has been less than half of what was expected, however.

“The reason for this surprising result could be related to the fact that it's a city tax and therefore store owners have to be concerned about the ability of consumers to shop at stores outside of Berkeley," said John Cowley, one of the researchers and co-author of the study. "Concerns about cross-border shopping could contribute to a low pass-through of the tax.”

The new law imposes a penny-per-ounce tax on all sweetened beverages, including iced tea, energy drinks, and sodas. According to the research, since March, consumers have not been finding higher prices on shelves. In other words, the soda tax does not have the desired effect of discouraging customers from buying sugary drinks.

 

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