Philadelphia’s Mayor Jim Kenney wants to do something that no other major American city has done so far: pass a targeted soda tax.
If you think you’ve heard this before, you’re not wrong. In 2011, then Philadelphia Mayor Michael Nutter proposed a soda tax to help plug a $629 million hole in the Philadelphia School District budget. The proposed soda tax – a two-cents-per-ounce tax on soda and sugary drinks – didn’t garner much support and ultimately fizzled out.
The idea of targeting soda and sugary drink consumption in cities didn’t completely go flat: then-New York City Mayor Michael Bloomberg didn’t suggest a tax but did propose a ban on sugary drinks larger than 16 ounces offered for sale at most restaurants, theaters, sports arenas, delis and vending carts in the Big Apple. While Nutter touted his tax as a revenue raiser for Philadelphia schools, Bloomberg made it clear that he intended to make New York City more healthy. Bloomberg’s ban initially passed but was eventually invalidated by the courts.
Even though the New York City ban on sugary drinks wasn’t successful, it did teach politicians a thing or two about how to frame the fight against the soft-drink industry. That’s why, when Philadelphia pitched the soda tax a second time, Mayor Kenney came out swinging. He first brought Dr. Thomas A. Farley on board to be the city’s health commissioner – the same Dr. Farley who served as New York City’s health commissioner during the Big Apple’s ill-fated soda ban. Mayor Kenney was clearly sending a message to Philadelphia residents: he’s not just taxing soda, he’s saving your life. And keeping you from getting fat. And staving off diabetes. You see, weaning you off of drinks that are bad for you – by pricing them out of reach – is ultimately good for you. It’s sort of like the tax on cigarettes and liquor which has, as you know, completely eliminated lung cancer and cirrhosis. Oh, wait.
So maybe those sin taxes didn’t actually put a stop to behaviors that we consider “bad.” But the $2 per pack (yes, per pack) “temporary” tax on cigarettes passed by the City of Philadelphia did raise money for schools. So that’s something, right? And those other sin taxes – like the taxes on alcohol – do bring in revenue.
The key, apparently, is to combine those concepts to sell to voters. That’s why the latest proposal to impose a three-cent-per-ounce tax on soda and other sugary drinks in Philadelphia – a variation on a tax that failed before in Philly, as well as San Francisco – is being pitched as a way to bring in money and make the city more healthy. Maybe.
The head-scratching piece, of course, is why the focus on soda and sugary drinks and not, say, cheese fries or Tastykakes. If health is actually the goal, why aren’t we taxing potato chips and chocolate cake?
The American Beverage Association, the trade association that represents America’s non-alcoholic beverage industry, seems to wonder that, too. The ABA helped fund the fight against a similar tax in Berkeley – and lost. In 2014, Berkeley approved a penny-per-ounce tax on sugary drinks, like soda, energy drinks, and sugary coffee syrups. The tax, which is imposed on distributors, has been passed along to consumers in the form of higher retail prices – but the boost wasn’t as much as expected. If prices don’t spike, the theory goes, then soda and related drink consumption won’t actually drop.
Currently, 33 states already impose a sales tax on soda or sugar-sweetened drinks. At an average sales tax rate of 5.2%, consumers still pony up at the register for a Big Gulp or a Pepsi. For the tax to be effective at reducing consumption, the targeted tax needs to be relatively steep compared to the other options. Philadelphia’s three-cent-per-ounce tax on soda and other sugary drinks, the highest such tax proposed in the nation should, the experts believe, do just that. But what if it doesn’t? In order to garner support, the proposal needs to offer an additional benefit. That’s why, in March, Philadelphia Mayor Kenney focused on the revenue from the bill, claiming it would add:
- $256 million for universal pre-K;
- $39 million for 25 community schools;
- $23 million 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; and
- $26 million to the city’s pension system.
Pitching the tax as both a health solution and an economic benefit – and not merely one or the other – may just be the ticket.
Not everyone is convinced. Philadelphia City Council president Darrell Clarke has questioned the cost analysis, pointing out that the tax would likely disproportionately affect exactly the population Mayor Kenney claims he is trying to help. In a city where nearly one in four residents lives in poverty, Clarke says, “It doesn’t take a whole lot of analysis to determine where those sugary drinks are being sold. So the question is, is that fair?”
