To curb the rise of obesity and raise some extra cash, cities across the country are attempting to tax sugar, particularly sodas. However, the potential health benefits might not outweigh the cost to consumers and businesses, especially in poor areas.
Recently, Seattle jumped on the bandwagon and became the eighth American city to implement a soda tax. The tax is the second-highest in the country at 1.75 cents per ounce, being beat by Boulder, Colorado which has a 2 cent per ounce tax. This means a 12-ounce soda bottle will cost an extra 21 cents and a 2-liter bottle of soda will be an extra $1.18 more.
Seattle’s Mayor, Ed Murray, is claiming to use the projected $23 million per year to help fund before- and after-school programs, summer learning programs, college scholarships and early-learning programs.
Lessons from Philly
At the outset of 2017, Philadelphia implemented a 1.5 cent per ounce soda tax, as a way to increase revenue and the widespread poverty found in the city. However, two months after the tax was enacted, supermarkets and distributors were reporting a 30 to 50 percent drop in beverage sales and were planning layoffs.
Canada Dry Delaware Valley, which distributes around 20 percent of Philly’s soft drinks, reported that sales were down by 45 percent. Though sales were up in the suburbs, it wasn’t enough to break even, so they had to lay off 20 percent of their workers in March.
Beverage sales for ShopRite stores in the city were down 50 percent and 15 percent across all Super Brown’s Stores, run by CEO Jeff Brown. Pepsi also had to let go of 80 to 100 workers at a plant in Philly.
While sales have plummeted and layoffs have run amok, the city brought in $6.4 million in February and $5.9 million in January from the tax. To hit their target revenue for the year, each month they must bring in $7.7 million. Though 80 percent of the revenue is supposed to go toward expanding early-childhood education, parks, libraries and recreation centers, 20 percent of the revenue will go toward employee benefits and other programs that were never mentioned in the pitch to pass the tax.
So, it’s a double-edged sword where on one hand distributors and their employees are negatively affected by the tax, but the city has been bringing in some extra cheddar to employ more workers, particularly women and minorities, for pre-K gigs.
As for the health benefits, there has been a 27 percent decrease in sugary drink purchases, but the actual health improvements are still up in the air.
Soda ain’t the only culprit
According to the Center for Disease Control, a larger percentage of the population has been diagnosed with diabetes. In fact, since 1958, the prevalence of diabetes has increased by 700 percent!
Despite this increase in diabetes and obesity, particularly among young children, whether this is caused by sugary drinks is unclear. A Harvard study showed that a national soda tax of 1 cent per ounce, would decrease the amount people drink sodas by 20 percent and lead to a 1.23 percent decrease in obesity among our kids over 10 years.
However, this study pays no attention to close substitutes, such as beer, or in my case, pints of ice cream slightly microwaved with a quarter cup of Cinnamon Toast Crunch garnish. It also doesn’t consider that for more than a decade, people have been drinking less soda, yet obesity and diabetes are on the rise.
Unseen costs
When taxes are implemented, unseen consequences arise. For one, we didn’t dive into how Americans already pay more for sugary drinks due to sugar subsidies that keep sugar prices artificially high. According to the Congressional Budget Office report, consumers pay an extra $3.5 billion per year in the form of a hidden tax at the grocery store.
Taxes like the soda tax are also regressive, in that they affect low-income folk the most. These families already pay a large portion of their income on groceries, rent and other taxes. This small tax makes a big difference for poor people.
We also don’t know to what extent the negative effect on businesses will ripple through the economy of these communities. What we do know is that it is that the desired outcomes are still muddy.
There’s little doubt that drinking sweetened drinks are not as good as say water. But, how about we educate on the issue rather than taxing people on the issue?
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