We examine the effects of a sugar-sweetened beverage (SSB) tax that took effect in Oakland, California in 2017. Using rich customized universal product code -level data, we estimate the effect of the SSB tax on prices and volume in the short to medium term in a difference-in-differences framework. We pay particular attention to tax-avoidance strategies that may minimize the policy's intended effect including: (i) transfers to SSBs to the nontaxed border area (i.e., cross-border shopping), (ii) a move from high-priced per ounce single serve to their cheaper multipacks or larger format counterparts (i.e., format switching), and (iii) a move from high-priced beverages to less expensive ones within a category and format (i.e., brand switching). We find that the year-over-year tax pass-through is 49%. We find that volume sold of taxed beverages fell by 14%, but 46% of this decrease is offset with an increase in the border area. We also find evidence of substitution to lower-priced taxed beverages but no evidence of switching to cheaper formats. Finally, we find important dynamic effects with respect to tax pass-through, volume sold and cross-border shopping.
Keywords: health; sweetened beverages; tax-avoidance strategies; taxation.
© 2021 John Wiley & Sons Ltd.