News Briefs March 2, 2017

Philadelphia passes controversial soda tax

Philadelphia’s soda tax became effective on Jan. 1 of this year, gaining the already historic city recognition as one of only two places in the United States to successfully pass the controversial policy (The New Yorker, “There’s Now a Soda Tax in Philadelphia, but Not Because Sugar Is Bad for You,” 6.16.2016). Philadelphia Mayor Jim Kenney has proudly claimed that revenues from the tax were nearly double city official estimates for the past month. A $5.7 million tax haul shows that some are more than willing to pay for their sugar cravings (6ABC, “Philadelphia Mayor: $5.7M Beverage Tax Haul Doubles Projection,” 2.23.2017). However, there has been massive pushback as well. Many local businesses, distributors and especially consumers—the ones feeling the brunt of the tax—still oppose it.

Mayor Kenney’s proposed policies focused on addressing poverty and health problems, both of which are issues disproportionately impacting the youth. His new regulation is designed to hits two birds with one stone. A misnomer, the soda tax actually applies to any drink with added sugar or artificial sweetener such as diet sodas, sweetened teas, sports drinks and bottled lemonade—with the exception any milk products or fountain soda (Time, “Philadelphia Soda Tax: Gatorade, Iced Tea Taxes Like Coke,” 1.9.2017). Ideally, the 1.5 cents-per-ounce tax would push consumers away from drinking sugary drinks and, in the long-term, reduce the obesity in the city. The revenue gained from residents who cannot quit cold turkey would be used toward funding necessary education programs, specifically universal pre-kindergarten.

The beverage industry, however, has been fighting the tax since its proposal in 2016. The American Beverage Association (ABA) lobbied intensively against it, spending approximately $10.6 million, and formed the predominant No Philly Grocery Tax coalition (BevNET, “ABA Spent $10.6 Million in Unsuccessful Fight Against Philadelphia Soda Tax”, 8.2.2016). Criticism includes the regressive nature of the tax, as poorer families are more likely to purchase sweetened drinks; its negative impact on local businesses; and the possible departure of Coca-Cola and Pepsi from Philadelphia, which would translate to lost jobs.

The tax also seems to fall unevenly because it is based on volume, not on the extent of sugar within the product. Consumers will likely still buy expensive sweetened drinks packaged in small volumes, such as Red Bull, because, despite the increase, the price hike is only about 10 to 20 percent (The Philadelphia Inquirer, “Soda Tax: Will Your Favorite Beverage Cost More?”, 6.15.2017). On the other hand, products like store-brand two-liter soda would nearly double in price.

Furthermore, the ABA singled out what they feel is the unsound logic of the tax: if the point is to curtail obesity, then consumers will purchase less sweetened drinks over time. Subsequently, if tax revenue falls, they ask, what will the administration use to fund these new education programs they have started? Still, the ABA failed in preventing the Philadelphia City Council from passing the legislation in a 13-4 vote on July 16, 2016. Afterwards, in September, a coalition of the ABA and small businesses attempted to block the tax through the state Supreme Court, but their complaint was overturned (The Philadelphia Inquirer, “Soda Tax Lawsuit Dismissed,” 12.26.2016).

Many feel tricked by Kenney’s claims, as only 49 percent of the soda tax revenue will actually be used to fund the educational programs he proposed earlier (The Philadelphia Inquirer, “Big Chunk of Soda Tax Money Not Going to Pre-K”, 6.16.2016). Not only that, even with higher-than-projected revenues, Kenney is still short of meeting the $7.6 million monthly average that would achieve his $91 million goal. Many wholesalers and distributors have decided to pass the cost onto their customers, and the price hike of drinks everywhere have led to a 30 to 50 percent fall in sales, affecting teamsters the most (Bloomberg, “Philadelphia’s Soda Sellers Say Tax Has Reduced Sales by as Much as 50%,” 2.17.2017). There have also been rumors of distributors planning massive layoffs in response to the sales drops. Others even claim that the most desperate city residents have traveled out of Philadelphia to get their sugar fix (Forbes, “Philly Soda Tax News Just In—Shock, Horror, People Dodge Taxes,” 2.23.2017).

However, Philadelphia’s soda tax might set the precedent for other major cities to follow. Though Berkeley, CA, was the first to successfully pass the same legislation, the city’s population of 115,000 pales in comparison to Philly’s 1.5 million. If the tax manages to cut soda consumption with few consequences, then it will not be long before other major cities follow suit. Three cities in the Bay Area have already passed the tax, though it has not yet been implemented (San Francisco Chronicle, “S.F., Oakland, Albany Voters Pass Soda Tax,” 11.8.2016). Currently, Maine has proposed a statewide legislation preventing SNAP recipients from spending food stamps on soda and candy (CBS Boston, “Maine Asks Feds to Allow Ban on Food Stamps for Candy, Soda,” 2.20.2017). Whether this anti-junk food movement traverses across the U.S. or fizzles out may depend on Philadelphia’s success.


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