Association for Public Policy Analysis & Management

Taxation has long provided policy makers a tool to influence consumer behavior. Several jurisdictions have recently imposed consumption taxes on sugar sweetened beverages (SSB) in hopes of reducing obesity rates and its effects on health, productivity and healthcare costs. In this paper, we examine the effects of a sugar-sweetened beverage (SSB) tax that took effect July 1, 2017 in the city of Oakland, California. Our framework and rich customized Nielsen Homescan geo-coded data allow us to examine the dynamic effect of the tax on prices, consumption and sales across product categories and markets. Our framework allows us to study the extent to which consumers undertake tax-avoidance strategies such as: (i) stock piling soon-to-be-taxed items, (ii) moving to non-taxed items, (iii) switching to cheaper store brands, (iv) moving to low- price-per-ounce formats, and (v) cross-border shopping. It also allows us to study supply-side responses which may help firms mitigate these policies’ intended consequences including modifying prices: (i) across both taxed and untaxed goods, (ii) across different formats, and (iii) across taxed and non- taxed jurisdictions. Our results suggest that tax pass-through varied considerably across product category and formats. On the consumer side, our results suggest important substitution across time, product categories, formats and jurisdictions. These results show that both sellers and buyers were able to exploit certain features of the taxes to minimize its impact on total volume of SSBs consumed.