Making a Soda Tax More Politically Palatable

Margot Sanger-Katz
APRIL 3, 2016
New York Times
Mayor Jim Kenney was elected in Philadelphia last year after promising to bring the city universal prekindergarten, but he needed a way to pay for it.
Enter the soda tax. As part of his budget, introduced this month, Mr. Kenney has proposed taxing sugar-sweetened beverages at three cents an ounce, the highest soda tax proposed anywhere in the country.
The idea of a soda tax was introduced about a decade ago by public health researchers who were aiming to reduce consumption of sugary drinks, which they argued were causing increases in obesity and diabetes. But the message has been a tough political sell. Soda tax proposals, fought by the soda industry as nanny-state excess, have failed in New York State, San Francisco — and Philadelphia, twice. So far, the only American city to pass a soda tax is Berkeley, Calif.
Mr. Kenney is taking a different political tack. Instead of the usual eat-your-vegetables pitch of public health reformers, he is offering Philadelphians something more delicious: a giant pot of money to fund popular city projects. He says his soda tax could raise more than $400 million over five years, enough to fund not just universal preschool, but also renovations of local libraries, parks and recreation centers; “community schools” that wrap up social services with education; and cash for the troubled municipal pension program. He isn’t using the word obesity, or suggesting that people should drink less soda.
His tax would raise the price of a 20-ounce bottle of soda by 60 cents, an increase likely to make some shoppers think twice about a purchase. But when asked about the health benefits of the tax, he says, “There’s really serious health benefits in pre-K.”
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.
“I think Philadelphia may change the whole conversation about soda taxes,” said Larry Tramutola, a political consultant who helped Berkeley pass its soda tax, and who is advising other California communities looking at similar measures.
Budgetary needs recently played a role in advancing a substantial sugar-sweetened beverage tax in Britain. The tax was included in a budget released by the chancellor of the Exchequer, a Conservative, and is expected to pass with support from Labour and take effect in 2018. Other countries — in Europe, Asia and South America — are weighing such measures. South Africa is considering a sugary drink tax, making it the first African nation to do so.
“The world economy is squeezing a lot of governments, and they need revenue,” said Barry Popkin, a professor of nutrition at the University of North Carolina, who is deeply involved in studies evaluating the effects of the taxes in Mexico, Chile and Berkeley, and hears from a lot of curious public officials.
In this country the pitch has remained mostly about public health. San Francisco, where a measure last year just missed a needed supermajority of votes, is trying again to pass a tax on sugary drinks. So are a handful of other communities in California. Berkeley’s government has promised to devote the money to community gardens and other healthy initiatives. San Francisco is expected to do the same.
But public health advocates say they are watching the Philadelphia experience closely, and think it could influence other local lawmakers if it succeeds. Five years ago, Mr. Kenney, then a City Council member, opposed a soda tax when his predecessor proposed it to fight childhood obesity. This time, he looked around and decided that such a tax was necessary to pay for his prekindergarten program. “It turns out in the end to be the only revenue source,” he said.
The use of soda tax funds to finance local libraries, parks and recreation centers could be a shrewd political choice in a city where district representatives want to show results in their community. Ten of the 17 City Council members represent districts. “There’s an innate incentive to get in line,” Mr. Kenney said. The tax will continue to be debated as part of the city budget, which typically comes up for a final vote before the City Council in May.
The soda industry, of course, is fighting these efforts aggressively. As it has done in past years, it is responding through local lobbying and advertising, and by organizing coalitions of opponents. It argues that soda taxes are condescending and disproportionately hurt poor shoppers.
“Time and time again, voters in cities across the country say loud and clear they oppose soda taxes,” said William Dermody, the vice president of policy for the American Beverage Association.
In Philadelphia, industry officials are also making more local anti-tax arguments, saying that a tax devised to lower consumption of the taxed good will not be a stable source of revenue for an initiative, like universal prekindergarten, that requires permanent funding.
They also argue that the big soda tax, collected on distributors who deliver beverages into the city, may be too easy for individuals and retailers to evade through shopping outside city lines. The Teamsters union, which delivers sodas in town, and local grocers are worried about the impact on revenue and jobs. Soda tax opponents are also highlighting the sheer magnitude of the proposed tax: Three cents an ounce is enough to double the price of some products.
Public health advocates say they’re pretty agnostic about the reasons local leaders endorse and pass soda taxes. The key, they say, is that the taxes are large and transparent enough to influence consumer behavior. Any measure that substantially raises the price of soda should discourage consumers from drinking so much of a product linked to poor health outcomes, they say.
Mexico, for example, passed a sugary drinks tax that started in 2014. Mr. Popkin and his colleagues recently published the first big study of that tax and found it worked the way it was expected to: Prices of soda rose, and purchases of it fell, particularly among low-income people. Early data from Berkeley suggests that prices of soda rose in response to the tax.
Even if the Kenney strategy isn’t health-focused, advocates say it reflects the shifting views about sugary drinks as an appropriate target for policy. Growing numbers of Americans say they’re actively trying to avoid sodas, and fewer people are drinking them. That may make it easier to imply a health-related reason for a soda tax without making the case explicitly.
Mr. Kenney said he’d advise other cities to consider his approach to soda tax policies. As desirable as it is to get people in your community healthy, he said, “There’s a natural American response to, ‘You’re going to tell me how I’m going to eat or drink or smoke or fry.’ ”