Years of shaking up the can finally led to an explosion, as Philadelphia on Thursday lifted the lid on a long-sought soda tax.
City Council voted 13-4 to enact a 1.5-cent-per-ounce tax on sweetened beverages, making Philadelphia the first major U.S. city in more than 40 attempts to approve such a measure.
Berkeley, California, is the only other city in the nation to tax the sugary soft drinks. Oakland, San Francisco and Boulder, Colorado, will vote on similar initiatives in November.
Mayor Jim Kenney spearheaded the Philadelphia plan, playing up the $91 million in revenue projected from the levy next year. He promised to spend the funds on universal pre-kindergarten and other education programs.
In a press release issued after the vote, Mr. Kenney did not mention the soda tax’s supposed health benefits.
“Thanks to the tireless advocacy of educators, parents, rec center volunteers and so many others, Philadelphia made a historic investment in our neighborhoods and in our education system today,” he said. “I commend City Council for working with these community leaders to make quality, affordable pre-K, community schools and systemic improvements to parks, rec centers and libraries a reality.”
City Council heard from lobbyists before the vote. Chris Hunter, a Coca-Cola employee, compared the tax to Prohibition-era limits on alcohol, saying the levy would lead to illegal trade in a popular product.
“If this tax is passed, Philadelphia would create the worst black market for nonalcoholic beverages since Prohibition,” Mr. Hunter said.”Let’s not go back in history.”
Dr. Ken Margulies, president of the Board of the American Heart Association of Southeastern Pennsylvania, thanked the board for taking steps to address climbing rates of obesity and other medical problems.
“As Philadelphia has done time and again, you are acting boldly to deal with very real concerns and needs of Philadelphians and our country as a whole,” he said.
The campaign for the tax was financed in part by former New York City Mayor Michael R. Bloomberg, who was not shy about regulating his constituents’ consumption habits during his tenure.
From 2002 to 2013, the billionaire media magnate sought to enact smoking prohibitions in parks and restaurants, require certain food vendors to display calorie counts and ban trans fats outright.
On the matter of soda, he pushed for a tax on such beverages, for a ban on its purchase with food stamps and for a much-derided prohibition on large beverage containers. All of the measures either failed or were later repealed.
Mr. Bloomberg’s intervention in Philadelphia was met by a heated campaign and intense lobbying from the American Beverage Association, which represents Coca-Cola Co., PepsiCo Inc. and other soda manufacturers.
The group launched the No Philly Grocery Tax, coalescing local grocery stores against the tax hike and emphasizing increased costs at the checkout line in a series of advertisements.
Economists have long questioned the efficacy of sin taxes, such as levies on tobacco and alcohol, in significant part because the revenue benefits and the health benefits are in direct tradeoff. The state collects tax revenue only when people purchase and use the product, while the purported health benefits happen only when they do not.
Michelle Minton, a consumer policy analyst at the Competitive Enterprise Institute, said the tax on sodas will impose unnecessary costs on consumers and fail to deliver any public health benefits.
“Soda taxes are a stealth tax against middle class and especially lower income people,” Ms. Minton said in a news release.
Ms. Minton said the tax may cause some consumers to seek alternatives to soda, which may or may not be healthier. Other consumers will continue to buy soda, she said, and sacrifice other groceries.
Results from Mexico, which imposed a 10 percent tax on soda in 2014, indicate consumer patterns are more complicated than proponents of sin taxes believe. For instance, low-income households and homes with an obese head of household were less responsive to the soda tax in Mexico than other groups.
“The real-world effects of ’sin taxes’ imposed on certain food and beverages have been universally lackluster,” she said. “Experience shows soda taxes disadvantage the people least able to absorb the cost, with no measurable improvement in public health.”
Several studies also cast doubt on the health effects of such taxes.
A 2013 study in the American Journal of Agricultural Economics found that soda taxes do decrease consumption of sugary beverages but increase consumption of products with high levels of sodium and fat. A 2012 Cornell study found that consumption of soft drinks initially decrease in response to soda taxes but revert to pretax levels in the long run.
The evidence in Mexico bears out this premise. Although carbonated beverage sales dropped by 2 percent after the tax was levied in 2014, the market for the drinks rebounded last year, growing by 0.5 percent, according to the data service Canadean.
Mr. Keeney, who served on the City Council for 25 years before becoming mayor in January, succeeded where his predecessor, Michael Nutter, twice failed. The initial measure would have taxed soda at 3 cents per ounce but was halved as a part of a compromise.
• Bradford Richardson can be reached at brichardson@washingtontimes.com.
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