Some of us call it soda, others, pop. And even when referring to a drink that is not Coca-Cola, a third group says Coke.
The following 2015 map shows where you would say “Pop” and why I say “Soda” in New Jersey.
But whatever the name, we are drinking less:
Creating an incentive to further reduce our SSB (sugar sweetened beverage) consumption, the list of cities that tax “nonalcoholic drinks with caloric sweeteners” has just gotten longer. Tuesday, California voters in San Francisco, Oakland and Albany agreed on a penny an ounce tax. At two cents an ounce, Boulder, CO was more aggressive.
There is one possible glitch. Because all decided to tax the distributor, the impact is less definitive. It will depend on whether the expense is passed along to the consumer.
For Berkeley CA no is sure whether its 2015 tax or a PR campaign or both were the cause of less soda consumption in low income areas. Similarly, Mexico’s 10% soda tax correlated to a decrease. However, researchers ask whether it will last. Some have hypothesized that the downturn is an immediate response that will dissipate in the long term.
Our Bottom Line: Unpredictable Soda Taxes
Looking at soda taxes through an economic lens, we would see three ideas:
Depending on price, most of our buying behavior will be elastic or inelastic. Our demand is elastic if our response to a price change is considerable. Just the opposite, inelastic buying behavior means we stick with a good or services even when the price soars. So, the size of the tax determines if we are in the elastic or inelastic range.
When a SSB tax is passed, we can never be positive who will actually pay it. Called the incidence of a tax, the burden might have been borne on the supply- or demand-side by distributors or bottlers, retailers or consumers. If the consumer bears the incidence and demonstrates elastic demand, then the tax is having the intended effect.
Finally we cannot forget the Bloomberg graph that says soda sales are down. Ignoring tax incentives, demand could decrease and shift to the left simply because soda drinking is less socially acceptable. Or, as a behavioral economist might say, “Less soda drinking has become a social norm.”
My sources and more: WSJ and the LA Times provide more facts about last week’s SSB tax referenda. Meanwhile, for more on soda taxes, Berkeley is here and here and Mexico is here. Please note that sentences from Our Bottom Line were previously published in an econlife post.