This post was originally published by the University of Washington School of Public Health on January 7, 2019.
As expected, Seattleites paid significantly more for their Mountain Dews and Monster Energy Drinks last year. They also paid much more for diet drinks in some stores, even though non-sugary beverages were exempt from the city’s new tax.
Researchers at the University of Washington School of Public Health and Public Health – Seattle & King County (PHSKC) found the cost of Seattle’s so-called soda tax was almost entirely passed on to consumers.
The tax – which charges distributors of sweetened beverages 1.75 cents per ounce – took effect Jan. 1, 2018. Six months later, researchers found the average price of sugary drinks in Seattle was 1.70 cents an ounce higher – amounting to a 97 percent pass-through rate. A typical two-liter bottle of soda jumped from $1.80 to $2.95, or 64 percent. A 12-pack of sweetened drinks went from $3.15 to $5.59, or 77 percent more.
The aim of the tax is to discourage consumption of sugary drinks, which can lead to diabetes and other health risks, while also raising revenue to improve access to healthy food and to fund other nutrition and early learning programs.
“Although we weren’t surprised, it wasn’t guaranteed the tax would be passed on,” said Jessica Jones-Smith, associate professor of health services and epidemiology at the UW School of Public Health. “Distributors could have chosen to have paid the tax themselves, and take it out of their profits. Or they could have spread the cost across other items.”
Jones-Smith is co-leading a wide-ranging study of the effects of the tax along with Nadine Chan, assistant chief of assessment, policy development and evaluation for PHSKC. The research is funded with revenues from the soda tax. The six-month report on store audits was presented to the City Council Finance and Neighborhoods Committee on Jan. 9.
Researchers are also studying changes in behavior due to the tax, but those findings won’t be available until later this year.
For the six-month store findings, the research team compared prices before and after the tax took effect at more than 400 stores in Seattle and three cities in south King County: Kent, Federal Way and Auburn. A comparison area was needed to account for any other factors that might have affected drink prices.
The researchers looked at soda, sports and energy drinks, teas and coffees, juices, powdered drink mixes, water, milk drinks, fountain drinks and other snack items. They surveyed stores from supermarkets to coffee shops. “This is one of the most comprehensive looks at beverages by a number of different store types,” said Jones-Smith.
Among the key findings:
- Supermarkets and superstores only passed through 86 percent of the increased costs, while smaller grocery stores, drug stores and shops passed on more than 100 percent of costs.
- The average pass-through rate varied, from 62 percent for bottled sugary beverages such as fruit juice to 111 percent for energy drinks. The average pass-through rate for soda was 102 percent.
- Diet and other drinks that were not subject to the soda tax increased significantly (up to 44 percent of the price of the tax in some stores).
Researchers were surprised by the latter finding. “It could be that smaller storeowners increased the price of non-sugary beverages that weren’t subject to the tax because they simply did not know better, or because it was an opportunity to boost profits,” Jones-Smith said. Or, it could be that distributors to these stores increased the price of these beverages as well, according to Jones-Smith. Supermarkets and superstores did not raise the price of these non-taxed beverages.
Stores chose different ways to inform consumers of the tax. Some posted signs and included the tax in the shelf price. Others made no mention of the tax on the price tag, and some assessed the tax at checkout.
Jones-Smith said researchers collected prices again in October and November of 2018, though that data has not yet been analyzed. They plan to survey stores again in fall 2019.
The tax raised nearly $17 million in revenue over the first three quarters of 2018. Jones-Smith said that was much higher than projected because the city conservatively estimated revenues. “The higher projections say nothing about actual consumption patterns,” she added.
Other partners in the soda tax research are Seattle Children’s Research Institute, the UW Center for Public Health Nutrition, the UW School of Social Work and the UW Evans School of Public Policy. Researchers are looking at consumption among low-income children, health outcomes and the impact on small-business revenue.
Separately, Jones-Smith has received funding from the Robert Woods Johnson Foundation to conduct a study of soda taxes, and their regressive nature, in Seattle, Philadelphia and San Francisco. Among other things, the study will estimate revenue benefitting low-income communities compared to the amount of tax paid by low-income households.
Read the FAQs on the six-month store audit.
4 thoughts on “Seattle’s Soda Tax Almost Entirely Passed on to Consumers, Researchers Find”
Is this really a post from the Public Health Dept?
It actually looks to be an unbiased assessment. Sin taxes rarely affect behavior. The money collected is seldom used to alter behavior, and is directed toward other “priorities”.
I find that this “all stick and no carrot” punitive approach to be counter productive to progressive goals.
In this state with the most regressive tax system in the country you cannot keep piling on more user taxes that kill the poor and working poor. There is nothing progressive about over taxing the most vulnerable.
The health issue the sugar tax attempted to address was obesity and diabetes. However, the policy does not address the root cause of obesity and diabetes. While taxing sugar-sweetened beverages may help discourage people from drinking sugary drinks, and therefore consume less sugar and decrease their risk to obesity and diabetes, it does not address the crux of the problem. There are many underlying factors why people consume unhealthy foods – food deserts, higher prices for healthier foods, lack of running trails, lack of time to exercise, lack of time to prepare healthy meals, surrounding environment/social setting have abundance of unhealthy foods. Perhaps it would have been more effective if the policy addressed one of these contributing causes of obesity/diabetes, rather than a factor that does not show an abundance of scientific evidence that it largely leads to obesity/diabetes. By taxing sugar-sweetened drinks, it is no surprise the tax is almost entirely being passed on to the consumers. Many people buy unhealthy foods, such as sugar-sweetened beverages, because they cannot afford the healthy foods. Therefore, this policy potentially (intentionally or unintentionally) discriminates against low-income individuals and families. One may go as far as it discriminates against people of color. Data shows (http://www.city-data.com/poverty/poverty-Seattle-Washington.html) that in the city of Seattle, of all people that have an income below the poverty level, the overwhelmingly majority of them are black, American Indian and Native Hawaiian. No matter the population the policy discriminates against, if one even believes it does, the policy does not necessarily address the underlying cause of obesity and diabetes. Taxing sugar-sweetened beverages most likely will not make a noticeable impact on the rate of diabetes and obesity.
The sugar tax aimed to reduce obesity and other health risks, but unfortunately it did not necessarily reach its goal after the bill was passed. The tax was successful in gaining revenue from consumers of these sugary drinks, but research on obesity rates and consumer choices have yet to be revealed. While I agree that legislation should help create healthier alternatives for consumers, taxing personal decisions can lead for more choices we make in the market to be taxed or taken away. In order to determine the true effectiveness and motives of this tax, I suggest more case-control studies should be done to help show the differences in counties with this tax, and those without. These types of studies can often take more time to implement than legislators may care for, but the research can help guide policies that a community would be open to adapt with.
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