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Data and Assumptions

Taxes on soda and other sugar-sweetened beverages can generate considerable revenue for states, cities, and the nation. The Revenue Calculator for Soft Drink Taxes estimates potential federal, state or city revenues by allowing the user to choose the tax per ounce and the approach to taxing soft drinks (either sugar-sweetened beverages or all soft drinks including diet beverages are taxed). The calculator is built on several assumptions and multiple data sources, including:

Data

  • Total U.S. consumption of carbonated soft drinks (CSDs), fruit beverages (excluding 100% fruit juice), sports drinks, ready-to-drink (RTD) tea, flavored/enhanced water, energy drinks, and RTD coffee is based on gallonage (volume) industry data for 2008. Regional 2008 gallonage data is used for CSDs, fruit beverages, and RTD teas. Other beverages are based on national data.

    Source: Beverage World, 2009. State of the Industry 2009. Beverage World, Chicago.
  • The share of diet varieties in CSDs is ~31%.

    Source: Beverage Marketing Corporation, 2009. Carbonated Soft Drinks in the U.S. 2009. Edition, Chapter 3, September 2009. Beverage Marketing Corporation of New York.
  • National and state population US Census projections for all ages in 2007-2015 are used in state-level estimation.

    Source: U.S. Census Bureau, Population Division, Interim State Population Projections, July 1, 2004 to 2030: 2005.
  •  City population estimates for the top 25 cities for 2000-2007 are used in city-level estimation.

    Source: U.S. Census Bureau, Population Estimates Program. 2007 Estimates.
  • Beverage prices are based on the mid-point range for a combination of sale and regular prices and types of stores.

    Source: Online prices for multiple grocery chains, Spring 2009.
  • Annual inflation rate is 2.678% based on the mean annual price change for carbonated soft drinks over 1978-2009.

    Source: Bureau of Labor Statistics (BLS), 1978-2009. U.S city average for all urban consumers, seasonally-adjusted estimates.

Assumptions

  • Producers and retailers pass the tax fully on consumers.
  •  Beverage consumption across states is determined by their share in the U.S. population adjusting for variability in per capita beverage consumption across seven regions for CSDs and fruit drinks (Northeast, East Central, Pacific, South, Southwest, West, and West Central) and four regions for RTD teas (Northeast, West, Midwest, and South). States within one region are assumed to have the same per capita consumption.
  • There is no adjustment for tourism consumption.
  • Projections of per capita beverage consumption depend on historic trends in consumption of various beverages and vary by beverage (e.g., an annual reduction in CSD volume is assumed to equal 0.7% over 2009-2015).
  • Average beverage prices are assumed constant across states and cities.
  • Real prices of soft drinks remain unchanged over time.
  • If only sugar-sweetened beverages are taxed, prices of diet varieties remain unchanged from pre-tax prices.
  • The proportion of diet RTDs in 2009 is the same as for CSDs (~31%). Consumption of beverages other than RTD tea and CSDs is assumed to be of the regular variety.
  • The share of diet varieties in CSDs and RTD tea consumption increases by 0.5 percentage points annually during 2009-2015.
  • The price elasticity of demand for all beverages is -0.8 and for sugar-sweetened beverages -1.2 (when only regular beverages are taxed).
  • Annual population growth in the top 25 cities during 2008-2015 is equal to the average rate of annual population growth in each city between 2000 and 2007.
  • All customers are subject to the same tax rate (e.g., no exclusions for purchases made with EBT/using food stamps, reduced rates for some customers, etc.).