How well targeted are soda taxes?

Published on 4 December 2017

Soda taxes aim to reduce excessive sugar consumption. Their effectiveness depends on whether they target individuals for whom the harm of consumption is largest. We estimate demand and account for supply-side equilibrium pass-through. We exploit longitudinal data to estimate individual preferences, which allows exible heterogeneity that we relate to a wide array of individual characteristics. We show that soda taxes are effective at targeting young consumers but not individuals with high total dietary sugar; they impose the highest monetary cost on poorer individuals, but are unlikely to be strongly regressive if we account for averted future costs from over consumption.

Soda taxes aim to reduce excessive sugar consumption. Their effectiveness depends on whether they target individuals for whom the harm of consumption is largest. We estimate demand and account for supply-side equilibrium pass-through. We exploit longitudinal data to estimate individual preferences, which allows exible heterogeneity that we relate to a wide array of individual characteristics. We show that soda taxes are effective at targeting young consumers but not individuals with high total dietary sugar; they impose the highest monetary cost on poorer individuals, but are unlikely to be strongly regressive if we account for averted future costs from over consumption.

Revised January 2019

Authors

Rachel Cassidy

Rachel Griffith

CPP Co-Director, IFS Research Director

Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.

Pierre Dubois

Research Fellow Toulouse School of Economics

Pierre is a Research Fellow at the IFS, a Professor of Economics at the Toulouse School of Economics and a co-editor of the JEEA.

Martin O'Connell

Martin O'Connell

Research Fellow University of Wisconsin

Martin, previously Deputy Research Director, is a Research Fellow at IFS and Professor of Economics at the University of Wisconsin.