Philadelphia taxes soda to raise money for schools and parks

soda fridges
CC BY 2.0 Rex Sorgatz -- Fridges selling cans of soda

The mayor has portrayed the controversial soda tax as a great source of revenue with which to do fabulous things for the city, rather than a benefit for public health.

A soda tax has just been enacted in Philadelphia, the first major American city to do so. It’s been a long battle. This was the third time in a decade that the soda tax debate has occurred at City Council, but both of the last attempts failed. This time, however, Mayor Jim Kenney was determined to push it through. He proposed a 3-cent levy on each ounce of soda, iced tea, and other sugary drinks and finally settled on 1.5 cents.

Kenney’s approach to convincing people of the benefits of a soda tax has been noticeably different than that of his predecessors. He hasn’t painted it as a public health initiative or something that’s going to make Philadelphia residents any healthier; he hasn’t used the word ‘obesity’. Instead, he’s been describing it as a significant source of revenue (approximately $400 million over the next five years) with which to do fabulous things for the city.

According to Philadelphia Magazine, Kenney has three specific goals for this money. First, he wants to expand pre-kindergarten classes for kids in the city. Second, he will fund the establishment of 25 community schools. These are “neighborhood schools that provide other health and social services to residents who live nearby, with the specific programming at each facility being determined by the needs in the area.” Third, he wants to make physical improvements to parks, recreation centers, and libraries.

Margot Sander-Katz writes in the New York Times:

“His tax could raise the price of a 20-ounce bottle of soda by 60 cents, an increase likely to make some shoppers think twice. But when asked about the health benefits of the tax, he says, ‘There’s really serious health benefits in pre-kindergarten.’

“In other words, this soda tax isn’t for the nanny state; it’s for the needy state. Governments are starting to think of soda taxes as the next sin tax — an untapped source of revenue that could help with other things.”

Critics argue that the tax is ‘regressive’ – when flat-rate taxes such as this one unfairly punish lower-income families who lose a greater portion of their smaller incomes than wealthier people. Kenney’s administration insists this isn’t so. The tax will be shouldered by distributors, not consumers (although some distributors say they’ll pass that cost on). The tax is also optional; nobody is required to buy soda and there are cheaper, healthier alternatives out available.

Soda taxes have been shown to work in places like Mexico and Barbados, where soda consumption has declined since the introduction of taxes. The method does work, although it takes time to change deeply rooted habits. It raises awareness and generates important discussions. Ideally, the soda tax would be paired with other initiatives, such as regulating how beverage companies market to children.

Jullia Belluz reports for Vox:

“Taxes help shift social norms. Consider tobacco: Increasing the price of cigarettes through taxation was one of the biggest contributors to driving down the smoking rates. ‘Smoking rates didn't drop immediately, and taxation had a small effect on consumption immediately,’ said Roland Sturm, a senior economist and professor of policy analysis at RAND. But eventually the taxes had an effect, ‘and with fewer people smoking ... it becomes less acceptable to smoke, so it was a feedback loop.’ He said the same could happen with soda consumption.”

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