Notes about the Calculator


The Soft Drink Tax Calculator estimates the potential revenue that could be generated from a sales or excise tax.  Data comes from industry reports of total sales of non-diet carbonated soft drinks, fruit drinks, energy drinks, sports drinks, ready-to-drink teas, and vitamin waters in 2007 and volume in 2008.  The calculator includes several assumptions, including:

  • State sales of soft drinks are based on the fraction of the entire country’s population that lives in each state.
  • A price elasticity of -0.6 is used to estimate the reduction in sales due to price increases. (The -0.6 was based on a review of various estimates, some as high as -1.0).  An elasticity of -0.6 means that a 10 percent price increase would lead to a 6 percent reduction in sales. 
  • Bottlers and retailers will sell both diet and non-diet carbonated soft drinks at the same price, even though it’s only the non-diet beverages that would be taxed, thereby diminishing by about one-third the effect of the tax on consumption.  In contrast, a sales tax would affect only non-diet soft drinks.
  • Low-calorie diet beverages represent 30.6 percent of all carbonated soft drink sales.  The calculator assumes that no sports drinks, fruit drinks, “energy” drinks, and teas are diet beverages.
  • The average cost of soft drinks (both carbonated and non-carbonated) is 42 cents per 12-ounce serving (including sales from grocery stores, vending machines, restaurants, and other locations) and total sales amount to 14.416 billion gallons annually.

Note that inflation and the nominal increased revenues from state/local sales taxes resulting from an excise tax are not included in the calculator.

Population estimates are from the U.S. Census for 2008 and include all ages.  Obesity percentages and medical expenditures are applicable only to adults 18 years and older.  Medical expenditures have been adjusted for inflation from 2003 to 2009 U.S. dollars.  Costs do not include medical costs of childhood obesity or indirect costs of obesity. 

Sources:

1.  U.S. Census Bureau. Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2000 to July 1, 2008. Washington DC: US Census, 2009. Accessed at http://www.census.gov/popest/states/NST-ann-est.html.

2.  Centers for Disease Control and Prevention (CDC). Behavioral Risk Factor Surveillance System (BRFSS): Overweight and Obesity (BMI) – 2008. Atlanta, GA: CDC, 2009. Accessed at http://apps.nccd.cdc.gov/brfss/list.asp?cat=OB&yr=2008&qkey=4409&state=All.

3.  Finkelstein, EA, Fiebelkorn, IC, Wang, G. “State-level estimates of annual medical expenditures attributable to obesity.” Obesity Research 2004, vol. 12, pp.18–24. 


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