“In Philadelphia in 2017, the implementation of a beverage excise tax on sugar-sweetened and artificially sweetened beverages was associated with significantly higher beverage prices and a significant and substantial decline in volume of taxed beverages sold,” concluded the study, which was led by researchers at the University of Pennsylvania, Johns Hopkins, Harvard and the Philadelphia Department of Public Health.
By comparing sales data from one year before and one year after the tax was implemented in 291 chain retailers, the researchers found that the price of the beverages increased 0.65 cents per ounce in supermarkets, 0.87 in mass merchandisers and 1.56 cents in pharmacies.
In the same period, there was a 59% reduction in taxed beverage sale at supermarkets, a 40% reducing at mass merchandisers and a 13% reduction at pharmacies, resulting in an overall reduction of 1.3 billion ounces after the tax.
These declines are notably larger than in some other cities that also tax sugar sweetened beverages, such a Berkeley, according to the study.
The researchers hypothesize the differences may be due to Philadelphia’s higher tax of 1.5 cents per ounce versus Berkeley’s 1 cent per ounce, a greater pass-through of the tax to consumers in Philadelphia or Philadelphia’s higher poverty rate, which becomes pivotal when recognized that consumption of sugar-sweetened beverages tend to be higher among low-income populations who also are more price sensitive.
Bordering neighborhoods saw an increase in sales
While the tax proved successful within the city limits, an uptick in sales immediately across the border suggests some limitations on the strategy when used in isolated areas.
According to the study, “approximately one-quarter … of the decrease in taxed beverage sales volume was offset by an increase in volume of sales in bordering areas, indicating an overall reduction of 38%.”
Relatedly, the economic impact on business bordering Philadelphia “had an increase of similar magnitude in combined sales, so chains with stores both inside Philadelphia and just across the border might not have experienced significant business losses,” note researchers.
They also point to other studies that found no effect on national unemployment or employment changes in commercial food stores or manufacturing two years after Mexico’s tax, and other data from Philadelphia suggests no changes in monthly unemployment filings following the tax implementation.
Weighing the changes before and after the taxes, the researchers concluded in a release about the study that overall impact of the tax is “great news for the well-being of the people of Philly.”