Last fall, Berkeley, California, became the first city in the United States to pass a tax on sugar-sweetened beverages—soda pop, sweetened teas, sugary juices, and energy drinks. Proponents say the tax will discourage the consumption of a nutrition-free, even dangerous category of beverage. Critics counter with claims of an over-reaching nanny state whose interventions will do nothing to curb rates of obesity and diabetes.
To figure out who’s right, it’d be nice to have some data. But before Berkeley passed its tax, 30 other cities and states across the US had tried to introduce similar measures and failed. Berkeley’s tax is certainly raising revenues, but it’s too soon to know whether consumption has gone down or overall public health has improved. Luckily, somewhere else has a year’s head start on taxing soda: Mexico.
In 2013, Mexico’s congress passed a one-peso-per-liter tax on sugary beverages that went into effect all over the country—effectively raising their prices by 10 percent—and an 8 percent sales tax on junk foods including chips, cookies, candy, and ice cream. Both taxes went into effect in January 2014.
This policy change was both surprising and not, considering how much soda Mexicans drink: an average of 163 liters, or 43 gallons per capita per year, to be exact. That’s 40 percent more than the United States, which comes in at second place with 31 gallons. At the same time, about 71 percent of Mexican adults are overweight, and 32 percent are obese, according to the Organization for Economic Cooperation and Development. This is very similar to the US, where 70 percent of adults are overweight and 36.5 percent are obese. The diabetes rates of the two countries are similar as well, hovering between 11 and 12 percent of the adult population.
In other words, Mexico seems like a pretty good model for its northern neighbor. So when Mexico’s soda tax went into effect, Shu Wen Ng saw an opportunity. As a health economist at the University of North Carolina at Chapel Hill, she and her colleagues have modeled how soda taxes of different sizes would affect purchasing habits. But on-the-ground data was lacking because “very few countries have done a tax of this size,” she says, referring to Mexico’s 10 percent price bump. So along with collaborators at Mexico’s National Institute of Public Health, Ng started digging into the data. In June, they released their preliminary results.
During the first year of Mexico’s soda tax, purchases of sugar-sweetened beverages “went down on average about six percent, relative to what we think it would have been otherwise,” Ng says. (Her calculations took into account a preexisting downward trend in soda purchases in Mexico.) The decline accelerated as the year went on, reaching 12 percent by December.
So now we know: A soda tax is likely to reduce purchases of sweetened beverages, especially after people have a bit of time to adjust their purchasing habits to the new reality. But…is a 6 percent drop a lot? Enough to reduce obesity and diabetes rates?
“Six percent is an an impressive number given that the tax is relatively small,” says Kelly Brownell, a public health expert at Duke University who studies obesity. A 10 percent tax is “right at that cusp of where you might start to get changes in consumption,” he says. A 20 percent tax, which Berkeley’s averages out to be, would be even better. Alejandro Calvillo, director of the Mexico City advocacy group Consumer Power and a leading proponent of the tax, agrees. His group originally called for a 20 percent tax, and continues to push for an increase from one to two pesos per liter. Still, a six percent reduction in soda consumption “is going to make a difference,” especially considering how much of it Mexico drinks, says Y. Claire Wang, an Columbia University epidemiologist who has also worked on modeling the effects of soda taxes in the US.
At 20 percent, Berkeley’s soda tax is closer to what Brownell calls the “ideal tax.” But the city has a problem, Ng says: “leakage.” If you’re a Berkeley resident, it’s pretty easy to go to Oakland or San Francisco (which rejected a soda tax last fall) to stock up on cheaper pop. Mexico’s tax is national, meaning it’s much harder to avoid. It also affects more people in different kinds of communities, from the poor in remote, rural areas to the richest of the rich in Mexico City. That could make Mexico’s data more broadly relevant than the data that will eventually come out of Berkeley. “Berkeley is a very unique location” in terms of education levels and overall wealth, Ng says. “It’s not at all representative of the rest of the US.”
Speaking of income inequality: Ng’s study also confirms a more troubling prediction about soda taxes. “We suspected that a [soda] tax on this scale will have a high impact on lower income communities,” Wang says. That soda taxes are regressive—that is, they hit the people who can least afford them the hardest—is a common argument against them on both sides of the border. Ng’s analysis seems to bear that out, at least in the short term. In the first year of the tax, it was the poorest people who cut back on soda the most, averaging a 9 percent decline and peaking at 17 percent in December. That gap between the rich and poor leaves a bad taste many people’s mouths, especially considering Mexico’s high poverty rate and lack of nationwide access to free, clean drinking water.
But you know what else is regressive? Obesity and diabetes. Those conditions and their complications “disproportionately affect the poor, who can least afford the healthcare that these diseases demand,” Brownell says. “So if this part of the population is responding most strongly to the tax, then they are likely to benefit most from reduced healthcare costs.”
Mexico’s data answers another question Wang has been wondering about: Once consumers reduce their soda consumption, “what else do they drink?” Ng’s analysis hints at an answer, showing a four percent increase in purchases of bottled water over 2014. “That’s a good shift,” Wang says. Even better, of course, would be if all Mexicans had access to clean tap water.
Ng points out that water quality tests in Mexico City routinely say the water is safe to drink, but the reality remains that no one, including me, trusts those tests enough to pour ourselves a glass. (In nearly five years of living in Mexico City, I’ve seen someone drink tap water exactly once. I remember because it was so shocking.) And plenty of households in Mexico don’t have running water at all.
“That’s a changeable problem,” Wang says—if the Mexican government spends the tax revenues in the right way. One popular proposal would have earmarked the earnings from the soda tax to pay for purified water fountains in schools all over Mexico. But that agreement was never finalized, and it’s hard to know where the soda tax revenues are actually going.
Now that Mexico’s soda tax has proved itself, Calvillo, the consumer advocate, hopes to make it even better. In addition to doubling the soda tax to 2 pesos per liter—bringing it closer to the magic number of 20 percent—he’s lobbying to remove sales tax from bottled water. “Most of the time, if you go to a little store to buy a water it will cost you almost the same a soda. So people opt for the soda,” he explains. If bottled water weren’t subject to sales tax, it might finally be cheap enough to lure people away from pop.
At the very least, soda taxes and the education campaigns around them could change how Mexicans—and other people around the world—view sugar sweetened beverages. Programs like Mexico’s and Berkeley’s can have what Wang calls “a lighthouse effect,” drawing attention to soda’s role in chronic health problems. “A soda tax alone is not going to solve the entire obesity and diabetes epidemic,” she says. Still, it might help “shift people’s mindset about these beverages. They’re not innocent.” Mexico’s soda tax was ahead of its time. But with data like this, it probably won’t take the US long to catch up.
