Philadelphia Prepares For $400 Million Soda Tax Experiment

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Guy Bentley Research Associate, Reason Foundation
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Philadelphia Mayor Jim Kenney will set out plans Monday to impose a three cent soda tax on every ounce of sugary drinks.

Kenney claims his tax plan will bring in $400 million over the next five years that will be spent on education initiatives and recreational facilities. But Kenney could face a fight back from the city council, which has been historically hostile to introducing soda taxes, rejecting two previous proposals from Kenney’s predecessor Michael Nutter.

The proposed tax will be levied on distributors, but the the beverage industry claims the cost will be passed directly onto consumers — as it was in Berkeley, Cali.

“Soda tax proponents are asking us to suspend normal assumptions about human behavior and simply assume that people who reduce soda consumption to avoid the tax, won’t just make their own sugary drinks and won’t replace the calories with other high-calorie foods or drinks,” said head of the risk analysis division at the National Center for Public Policy Research Jeff Stier.

No credible studies to date show significant impacts soda taxes have on obesity. Sugar taxes are, in fact, inefficient and hit the poor hardest, according to a research note from the U.K.’s Institute of Economic Affairs (IEA).

Even if people were to change their behavior in response to higher taxes, consumers will often just switch to cheaper brands or buy their groceries from cheaper shops. “This leads to the consumption of inferior goods rather than the consumption of fewer calories,” says the note’s author and head of lifestyle economics at the IEA Christopher Snowdon.

The IEA points to the example of Denmark’s so-called “fat tax,” which was introduced in October 2011. The tax proved so ineffective, with people switching to cheaper brands or buying the products they preferred from across the border, that it was repealed in January 2013. The tax was also hugely unpopular.

“No impact on obesity or health outcomes has ever been found,” Snowdon writes. “Early evidence from Mexico suggests that a ten percent tax on sugary drinks led to an average daily decline in consumption of 36ml per person.”

“As Tom Sanders, a professor of nutrition and dietetics, notes, this is the equivalent of 16 calories and is ‘a drop in the caloric ocean. Long-term reductions in total energy in the range of 300-500 kcal/d are probably needed to prevent obesity.'”

Snowdon concludes by citing a systematic review of 880 studies that found “the public health case for using economic instruments to promote dietary and physical activity behavior change may be less compelling than some proponents have claimed.”

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