Last week, Philadelphia became the first major city to pass a “soda tax.” While other cities have tried and ultimately failed to pass similar pieces of legislation, Philadelphia was successful. So what made Philadelphia different?
The first thing to note is that this wasn’t the first time such a bill had been proposed in Philadelphia. The Mayor at the time (Michael Nutter), proposed a similar bill back in 2011 to help compensate for a shortfall in the Philadelphia School District budget. However, this didn’t go anywhere and the bill ultimately failed. This time around, the new Mayor (Jim Kenney), used a two pronged approach to justify the tax. Or, put more cynically, a two pronged approach to sell the tax in the court of public opinion.
The first salvo was that soft drinks are bad for you. By raising the price, this will make them less a “standard food,” and more an “occasional food” (theoretically). Adding this tax will help wean people off of soft drinks, making them healthier and reducing health risks. But this isn’t enough on it’s own – it failed in New York City, where the response was largely against the nanny state and a strong response against the government telling people what they could and could not eat/drink. Telling people what they can and can’t do is a sure-fire recipe for failure. This is where the genius of the latest tax came in.
Mayor Kenney’s next salvo positioned the soda tax as a revenue generator for the city.
“(the tax) would fund five initiatives over five years:
- $256 million for universal pre-K, which Kenney hopes to grow by 10,000 seats by 2020.
- $39 million for 25 community schools, which would incorporate academic, health, and social services.
- $23 million for Council President Darrell L. Clarke’s plan to retrofit city and School District buildings to make them more energy-efficient.
- $56 million to repay part of a $300 million proposed bond for rebuilding parks and recreation centers.
- $26 million to the city’s pension system, which has a $5.7 billion deficit. (source)”
The genius here is that the tax now has a lot more support on council. For those members who want to create jobs or renovate schools, this suddenly gives them the funds to launch those projects. It’s a masterful stroke that positions the tax as a clear benefit for the city.
The tax has critics. In particular, the beverage industry is wondering why they are being targeted, while other industries, such as chips, fast food, and other unhealthy foods, are remaining unscathed. In addition, the tax would affect those in lower income brackets, as they tend to be the highest consumers of soft drinks. However, in Mexico where a soda tax was introduced in 2014, those of lower-income reduced their soft-drink consumption faster than any other group. From a 2016 study by Colchero and colleagues:
All three socioeconomic groups reduced purchases of taxed beverages, but reductions were higher among the households of low socioeconomic status, averaging a 9% decline during 2014, and up to a 17% decrease by December 2014 compared with pretax trends. (Colchero, 2016)
It remains to be seen how this tax plays out for the consumer. The tax of 1.5 cents per ounce is levied on the distributors, not the consumer. However, if distributors pass this on to consumers, then the cost of a 12 ounce soda would go up by 18 cents, while the cost for a 12-pack of 16 ounce cans would go up $2.88.
While the soda tax may help shape habits and encourage the consumption of healthier options, it’s not a magic bullet solution. While my 12 ounce soda in Philadelphia has an additional tax, the doughnut I’d have with it is not. Neither is the bag of potato chips or ice cream sandwich. So while this is a step in the right direction, there are many more battles to be fought, and much more progress that can be made.