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A new paper looks at the short term impact of the first city-level tax to be levied in the USA on sugar-sweetened beverages which was enacted by the voters of Berkeley, California in November, 2014. It finds that the impact of the tax on consumption has been limited because only half of the tax has been passed on to consumers in the form of higher prices. For Coke and Pepsi, only 22 percent of the tax was passed on to consumers.

It is a reminder that with indirect taxes, the producer/retailer chooses whether to pass on some or all of the tax. It appears that many retailers have chosen - for the moment at least - to absorb the tax by paying some of it themselves.

One factor could be that, as a city tax rather than a state tax, retailers in Berkeley are concerned that passing on all of the tax might lead to frequent "cross-border" shopping.

The Berkeley soda tax is an example of an ear-marked tax in action! Revenue collected from the tax – projected to be $1.2 million in the first year – goes into a Berkeley general fund, part of which has been earmarked for healthy living programmes.

When soda taxes fail (International Business Times)

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