Here’s What You Should Know About Philadelphia’s New Tax On Soda

Image courtesy of J-J-W

Philadelphia is just the second municipality in the United States (after Berkleley, CA) to pass a tax on sugary beverages, though dozens of places have tried it. Well, okay, but what does that mean for soda drinkers in Philadelphia, and could your city or county be next?

Here are some of the questions that you might have about the tax if you live elsewhere, and discussion of the tax hasn’t dominated the news for you.

When does the tax start? The city would begin collecting the tax on January 1, 2017. Trade group the American Beverage Association has promised (or threatened, depending on your point of view) to “take legal action” against the law before that.

How much is the tax? It’s $.015 per ounce. That means the tax imposed on a 20-ounce bottle would be $.30, while the tax on a one-gallon jug of sweetened iced tea would be $1.92.

The taxes will be imposed at the distributor level, not at retail, so customers may not end up paying the full amount… or could pay even more if retailers round prices up to the nearest $.05, $.10, or $.25.

The original proposal was a $.03 tax, and politicians reached a compromise that made drinks with non-nutritive sweeteners, including substances like stevia, subject to the tax. Then the tax was cut in half.

To simplify things, the common 1-liter and 2-liter sizes of soft drink bottles will have their taxes rounded down to $.50 and $1 respectively.

What drinks are affected? Originally, the tax would have only included beverages with sweeteners that add sugar and calories, including high fructose corn syrup, evaporated cane juice, and maple syrup. Drinks that are at least half milk or fruit juice are not taxed. Philly.com has a handy visual guide to different drinks and how much the tax will affect their prices.

Who has to pay? The tax only applies in the city limits, creating an advantage for soft drink fans with cars who can go pick up cases and 2-liter bottles elsewhere.

What will be done with the money? Soda taxes are usually sold as a public health measure, which made the campaign for the tax in Philly unique: it was sold as a way to raise money for pre-kindergarten programs, city parks, libraries, and tax credits for businesses that sell beverages without added sweeteners.

It later came out that not all of the money will go to education and parks, and about 20% would go to fund other city programs and benefits for city employees.

Where else have soda taxes succeeded? Only in Philadelphia and in Berkeley. A bill that would have made a tax statewide in California was voted down in committee last year, and other municipalities have tried it.

The entire country of Mexico has had a tax that raises prices roughly 10% since the beginning of 2014, but the latest reports are that soda sales are up. That’s good if the goal of the tax is to raise money, but bad if it’s to reduce consumption of added sugars.

Who wanted the tax to succeed? This is the third time that a soda tax has been proposed, and the first under new mayor Jim Kenney. Most of the funding for a nonprofit that promoted the bill came from notorious soft-drink foe and former New York City mayor Michael Bloomberg.

The Center for Science in the Public Interest, a health-focused nonprofit, said in a statement that the passage of the tax “is a huge win for the city’s children and parents, who will now benefit from expanded pre-K and parks.”

Apart from raising extra money (an estimated $91 million) for schools and parks, proponents say that discouraging city residents from drinking soda will have long-term positive effects on their health.

Who wanted the tax to fail? The American Beverage Association spent about $5 million in ads against the tax, and opponents argue that the tax will hurt people who work in stores or at distributors, as well as disproportionately affecting poorer residents who can’t go pick up their favorite soda in bulk at a suburban Costco. A local Pepsi bottler even offered to put up the money to pay for a year of universal pre-K if the city council would delay the vote.

Experts on this side say that cutting back on sweetened beverages has a minor effect on health, and that obesity rates have kept rising even though Americans are actually drinking less soda than we used to.

Is my city next? Maybe. The first challenge will be keeping the law in place until 2017 in spite of legal challenges from the industry. Planned initiatives in the coming year will be in Oakland and San Francisco, CA, Seattle, and Multonomah County, OR, the county that contains Portland.