Selection Effects and Heterogeneous Demand Responses to the Berkeley Soda Tax Vote

Early evidence from household-level surveys suggests that the one-cent-per-ounce tax on sugarsweetened beverages which took effect March 1, 2015 in Berkeley, California decreased consumption of sugar-sweetened-beverages by 21%2. Even if these findings are robust, the welfare implications of expanding the Berkeley soda tax policy at a national level are complicated by selection effects inherent in the populations of both voters and consumers. Based on their demographic composition, the soda preferences of voters who supported the Berkeley referendum likely differ from the preferences of high-soda-consuming households, and from the preferences of the average-soda consuming household in the United States. Further, we find consumption responses related to the tax interact nontrivially with consumer heterogeneity. Some of these responses directly counter the public policy goals of a soda tax: first, highconsuming households are less price sensitive, and therefore less responsive to price changes following a tax; and, second, “reactance” among high-consuming populations led to increases in soda consumption immediately following the passage of the tax, partially mitigating reductions in soda consumption.