Philadelphia’s Soda Tax Is Reducing Consumption—and Maybe Jobs

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Consumers are buying less soda thanks to taxes, but the long-term health and economic effects remain unclear.

By Elena Gooray

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(Photo: Francesco Gallarotti/Unsplash)

Last year saw a strong legislative push in support of soda taxes, which target sugary drinks in the hopes of raising revenue and, perhaps, bettering public health. Recent data suggests these taxes do get people to drink less soda—but those reductions may, in turn, push distributors to threaten layoffs.

Philadelphia became the first major city in the United States to pass a soda tax last summer, and the tax went into effect at the start of 2017. Now, two months in, supermarkets and distributors are reporting a 30 to 50 percent drop in beverage sales, according to the Philadelphia Inquirer. As a result, Canada Dry Delaware Valley, one of the city’s biggest distributors, has warned that it will cut 20 percent of its workforce in March; another franchise grocery store owner says he will lay off 300 workers this spring.

These initial results from Philadelphia — something of a national test case — give early answers to some unknowns about soda taxes’ impact, which Pacific Standard reported on last July. The taxes that have actually been implemented — in Philadelphia and Berkeley, California — are imposed on soda distributors, rather than directly onto consumers. For that reason, as Donald Marron of the Urban Institute think tank explained, it’s not guaranteed that such taxes will increase prices for consumers and so change their purchasing habits. In Philadelphia, it seems that companies are passing costs onto their shoppers, who have responded by buying less soda. Similar patterns have been found in Berkeley and Mexico, particularly among low-income consumers.

This news sounds positive for public health, given concerns that sugar consumption contributes to chronic diseases like diabetes and heart disease. But whether these taxes truly improve health rests on the kinds of drinks they’re most affecting, according to Marron. Philadelphia and Berkeley’s taxes are based on drink volume, which doesn’t account for the fact that one liter of, say, Coca-Cola contains considerably more sugar than a liter of other soft drinks like Vitamin Water. Lumping sweetened beverages together makes soda taxes a “blunt instrument” for reducing sugar intake, Marron said, noting that it will take longer to measure the costs’ health effects than their financial ones.

The World Health Organization also seems skeptical of volume-based taxing. In October, the WHO recommended that soda taxes be tied directly to a drink’s exact sugar levels, rather than simple volume.

While soda tax advocates have long considered possible public-health effects, the threats of job cuts introduce economic concerns. Philadelphia Mayor Jim Kenney, however, wrote in an email to the Inquirer that companies could conserve costs through means other than cutting jobs, like reducing bonuses. “I didn’t think it was possible for the soda industry to be any greedier,” Kenney wrote. “They are so committed to stopping this tax from spreading to other cities that they are not only passing the tax they should be paying onto their customer, they are actually willing to threaten working men and women’s jobs rather than marginally reducing their seven figure bonuses.”

More U.S. cities will soon have to navigate these tax tradeoffs: Boulder, Colorado; Cook County in Illinois (which includes Chicago); and three Bay Area cities (San Francisco, Oakland, and Albany) approved their own soda taxes last November.

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