Cross-state shopping killed Chicago’s soda tax
Newswise — This week, the Cook County’s Board of Commissioners voted to repeal their tax on sugar-sweetened beverages by a vote of 15-1. This is the latest twist in a multi-year back-and-forth battle between soda tax advocates and opponents. John Cawley, professor in the department of policy analysis and management at Cornell University, is studying the impact of the soda taxes in Berkeley, CA; Cook County, IL; Philadelphia, PA and Boulder, CO. He says evidence suggests that consumers circumvent such taxes by cross-state shopping, thus defeating the main purpose of the tax.
Media Note: A video of Cawley explaining his research on the Berkeley soda tax can be viewed on YouTube and downloaded here, https://cornell.box.com/v/CawleySodaTax along with Cawley’s recent paper about the effects of a new soda tax in Berkeley, California.
“Our research on the Berkeley, California, soda tax found evidence consistent with cross-border shopping: that people may have circumvented the tax by shopping outside of Berkeley. Based on media reports, that seems to have been an issue in Cook County as well, leading to grocers being angry about lost business and less tax revenue for Cook County.
“Ideally such taxes would be enacted at a higher level of geographic aggregation, such as the state or country, which would make such taxes far harder to evade.
“It seems that opponents of the Cook County tax were very effective in making the tax salient and visible to consumers through advertisements on TV, radio, and even store shelves. In addition, a number of implementation issues (such as whether the tax could be levied on food stamp recipients) kept the issue in the media. In many cases, a more salient tax leads consumers to reduce their purchases even more, but in this case it may have resulted in cross-border shopping and anger at the politicians who enacted it.
“Cook County largely enacted the tax to generate revenue as opposed to achieve a public health objective. There remains a sound economic principle behind taxing high-calorie, low-nutrient foods – to ‘internalize’ the external costs caused by poor diets. Specifically, obesity and the chronic diseases associated with poor diet, such as Type II diabetes, impose substantial costs on taxpayers through public health insurance programs such as Medicaid and Medicare. Ensuring that consumers are confronted with more of these costs at the point of purchase can help decrease these external costs and improve health.”
Cornell University has television, ISDN and dedicated Skype/Google+ Hangout studios available for media interviews.
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