Impact of SSB Taxes on Employment Disputed in New Study
Researchers with the University of Illinois, Chicago, Institute for Health Research and Policy have published a study allegedly concluding that, contrary to industry claims, sugar-sweetened beverage (SSB) taxes “do not have a negative impact on state-level employment.” Lisa Powell, et al., “Employment Impact of Sugar-Sweetened Beverage Taxes,” American Journal of Public Health, February 2014. Using a macroeconomic simulation model to assess the employment impact of a 20-percent state-level SSB tax in California and Illinois, the study’s authors also factored “changes in SSB demand, substitution to non-SSBs, income effects, and government expenditures of tax revenues” into their final calculations.
Based on this analysis, the study estimates that SSB sales would decline by $678.8 million in Illinois and $1.2 billion in California as the result of a 20-percent tax. At the same time, however, SSB taxes would increase government revenue by $554.3 million in Illinois and $940.4 million in California while sales revenue from substitution with non-SSBs would reach $81.8 million in Illinois and $318.5 million in California, “on the basis of cross-price elasticity estimates,” and $365.3 million in Illinois and $613.8 million in California, “on the basis of full-volume beverage replacement.” Taking into account increased government revenue and non-SSB sales, these findings suggest that “the imposition of a 20 [percent] tax on SSBs would result in a net employment increase of 4,406 jobs in Illinois and 6,654 jobs in California, which is close to a zero net change.”
The study’s authors also criticize employment studies that focus only on “the industry effect of reduced spending on SSB,” arguing that “job losses in the private sector are almost completely reversed when we model all effects from the tax.” In particular, they denounce a recent American Beverage Association (ABA) study linking a proposed federal SSB tax to the loss of 210,000 jobs in the beverage industry and another 150,000 jobs in related fields. “A key distinction of [our] study is that we report the net employment effect rather than the gross employment effect that industry highlights,” note the researchers. “The industry claims of regional employment losses related to proposed SSB taxes are overstated and such claims may mislead lawmakers and constituents.”
Meanwhile, ABA has publicly rebutted these critiques, countering that soda taxes will negatively affect middle-class jobs and small businesses. “No matter how you look at it, soda taxes mean fewer jobs. Americans have made it clear they don’t support taxes and other restrictions on common grocery items, like soft drinks,” states a February 13, 2014, ABA news release. “For these and other reasons, tax proposals continue to fail wherever they are introduced. Change happens when everyone works together—government, academia, healthcare, and businesses like ours. It’s time we collaborate to find real solutions. We hope serious thought leaders will agree.”
Issue 514
