Uncalculated First-Party Externalities Given a Beverage Tax

With many characterizing obesity as a national priority, the U.S. government is considering a 1-, 2-, or 3-cents-per-ounce (cpo) federal sin tax on soda products. Objective: Because prior research finds that consumers substitute equally, if not more, dangerous nicotine products with a tobacco sin tax and common alcohol-like household goods with alcohol prohibition, this research sets out to determine whether the imposition of a soda sin tax produces similar first-party externalities. Method: Adaptive conjoint analysis is utilized among respondents across several regions of the United States, including actual soda consumers. Results: This study finds that given a soda sin tax, soda consumers do not substitute healthier beverages, that is, beverages with relatively fewer calories and grams of sugar and sodium, such as water, pure fruit juice, or unsweetened tea. Instead, soda consumers switch to other sugary beverages not considered in most legislation, such as sweetened coffees, teas, or sports drinks, or continue consuming soda at tax rates of 2 and 3 cpo after the shock of a one-cent tax wears off. Conclusion: Unlike prior research examining decreased soda consumption across a general marketplace, this research offers insight into potential externalities among the key transacting actors in such an exchange: soda consumers.