Local Excise Taxes, Sticky Prices, and Spillovers: Evidence from Berkeley's Soda Tax

Abstract

This paper evaluates the price and consumption effects of the first municipal soda tax imposed in the United States. Using high-resolution scanner data and data-driven approaches to select comparison units for counterfactual analysis, we estimate the tax has no effect on prices or consumption at drugstores, but modestly increases supermarket prices of some soda products, constituting a minority of soda consumption. We find limited evidence of reduced supermarket purchases of soda in the taxed jurisdiction. Half of these reduced purchases are substituted to just outside the taxed jurisdiction. Retailers' limited price responses are attributed to the localness of the tax.