Putting a Tax on Bottled Water

Bottled water is the fastest-growing market in the beverage industry. The Beverage Marketing Corporation reports Americans drank 11 billion gallons of bottled water in 2014. That’s about 33 gallons per person.

While the bottled water boom has been good for the bottom line of dozens of companies, there is a big concern about what all these bottles are doing to the environment.

To cut back on bottles, many cities and states have put a tax on bottled water. In Chicago, Illinois, the tax is five cents per bottle. California puts an extra price on bottles, but offers a refund if they are recycled.

The state of Washington recently implemented a tax of its own, which is the focus of “Measuring Consumer Responses to a Bottle Water Tax Policy,” a paper authored by Peter Berck and a team from the University of California, Berkeley. The paper was recently accepted to appear in the American Journal of Agricultural Economics.

“You would expect when you tax something consumption goes down,” co-author Andrew Stevens said. “We were not only able to look at the results but what happens when the tax was removed.”

The authors were able to access sales numbers from a major retailer in Washington to see if the tax stopped people from buying bottles. To view the paper, and to schedule an interview with Andrew Stevens, please contact Jay Saunders in the AAEA Business Office.

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