Evaluating the Effect of Soda Taxes Using a Dynamic Model of Rational Addiction.

This article examines the impact of soda excise taxes on sugar-sweetened beverage (SSB) consumption in the United States, focusing on the role of addiction to caffeine and sugar. Using the Becker-Murphy model of rational addiction, the authors provide evidence that consumers are forward-looking and rationally addicted to sodas containing caffeine and/or sugar, and they develop a multidimensional dynamic structural model to quantify how soda taxes affect purchases, consumption, and addiction levels. Policy simulations based on real-world soda taxes in Berkeley, CA, and Philadelphia, PA, suggest that a one-cent-per-ounce tax on sugary sodas could reduce sugary soda consumption by about 50%, with sugar playing a larger role than caffeine in substitution patterns. The study finds that accounting for addiction significantly increases the estimated effectiveness of soda taxes and projects that such taxes could reduce obesity-related body mass index (BMI) by approximately 2.8 to 3.1 units per individual annually, leading to potential medical cost savings of $642 to $717 per person. The authors note limitations including assumptions of statewide taxes without cross-border shopping effects and the exclusion of substitution to other sugary products, suggesting areas for future research.