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Do Soda Taxes Actually Decrease Consumption?

Ask the French.

Supervisor Scott Wiener today announced that he would be introducing legislation to impose a tax of two cents per ounce on soft drinks. Intended to reduce consumption of unhealthy beverages, the measure would go in front of the voters in November of 2014. A similar tax will be voted on by the city of Telluride, Colorado next week. Richmond, California voters rejected a proposal for a penny-an-ounce tax in 2012—with a lopsided 66.9% voting against it (thanks in part to a little campaigning by a certain ex-San Francisco mayor).

Besides burnishing Wiener's Bloombergian credentials, do these kinds of taxes work? Would a tax on soda actually decrease the amount of soda consumed in SF? 

It's hard to know. Though states have varying degrees of food and beverage taxes, it seems that no cities or states in the country have established a tax increase on soda like this one. In March, a Manhattan judge struck down New York mayor Michael Bloomberg's ban on large soft drinks. (Bloomberg has positioned himself in the lead on this issue. In fact, when Mexican President Enrique Pena Nieto proposed a one peso per liter tax, opponents attacked Bloomberg too.) 

The question is made more complicated because it turns out that the national rate of soda consumption has been declining since at least 1999, if not earlier. The purported explanation? Consumers are turning to bottled waters at increasing rates. So would a soda tax be superfluous? Or just the extra push needed?

Well, if stateside data is out, there are other places to look. Like France. Their one euro per container tax went into effect in 2012. At least one study indicated that within six months, that cost was being passed onto consumers. The result? A three percent drop in consumption in 2012. Sounds like an open and shut case, doesn't it?

But the situation may be more complicated. That's what Denmark's experience tells us. Dating from the 1930s, Denmark has taxed sodas. Well, make that had taxed them. In April, the government announced it would be eliminating those taxes altogether (as well as a much newer tax on saturated fats). Turns out that the tax did cut consumption. We know that because back in 2001, a hike in the tax rate resulted in a six to seven percent drop in soda purchases. From Wiener's perspective, that would be good news. The trouble? Thirsty Danes took to purchasing their sodas across the border in Germany. 

Bottom line: If a tax is big enough, it can make a dent in purchases. Some of the decrease, though, is going to be offset by folks buying sodas elsewhere.

So, were the soda tax to pass here in the city, should we expect gray-market Prius convoys laden with Fantas and Jarritos crossing the Bay Bridge from Oakland? We'll just have to wait and see. But you might want to start stockpiling Coca-Colas anyway. 

 

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