U.S. Cities Want to Tax Sugary Drinks

Carbonated soft drinks and sugary drinks are under attack by cities thirsty for a new source of revenue.

May 31, 2016

McLEAN, Va. – USA Today reports that some cities are singling out sugar-sweetened soft drinks as sources for revenue, with proposals that add extra taxes or health-like warning labels—“borrowing from the playbook used to largely stamp out smoking a generation ago.”

The war on soft drinks is being waged in a handful of cities so far, and they are gaining attention and could threaten sales. "They’re bleeding a slow death," Joe Agnese, senior industry analyst at S&P Global Market Intelligence, told the news source about the growing movement against carbonated soft drinks.

USA Today cites the following cities as actively seeking to raise taxes on sugary beverages:

  • San Francisco: Advertisements for sugar-sweetened drinks to carry warning labels starting in July.
  • Philadelphia: In June, the city council is expected to vote on a proposal to tax all sugar-sweetened beverages (soda, fruit drinks that aren't 100% juice, sports drinks, flavored water, energy drinks, pre-sweetened coffee or tea, cocktail mixers) at 3 cents an ounce, adding 60 cents in additional taxes on to a 20-ounce bottle.
  • Oakland: Voters will decide in November whether to add a 1 cent per ounce fee to sugary beverages.
  • Boulder, Colorado: A ballot measure could allow voters to decide this fall whether to impose a soda tax.

In Philadelphia, the additional tax revenue would fund early childhood education and other community initiatives. The mayor’s office also says the tax isn’t an “attack on soda,” but rather a target because a limited number of distributors make it easier to audit tax collections.

"We’re not doing this from the perspective of trying to discourage people from drinking soda," Lauren Hitt, a spokeswoman for the mayor of Philadelphia’s office, told the news source, adding that a tax on all products containing sugar would be difficult to administer. 

Meanwhile, opponents of Philadelphia’s tax plan say the sugary drink tax would hurt small businesses that won't be able to absorb a potential price uptick. And given the downward trend in soda consumption, the tax is not going to be a reliable source of revenue, suggested Larry Ceisler, whose firm Ceisler Media & Issue Advocacy works with the local Philadelphia coalition against the tax.

A Cornell/University of Iowa analysis of Berkeley, California’s soda tax that took effect in March 2015, the first such city ordinance in the United States, found that the measure raised retail prices for high-calorie sugary drinks by less than half the amount expected. “This is important because the point of the tax was to make sugar-sweetened beverages more expensive” so consumers would purchase and consume less of the products, noted John Cawley, professor in the Department of Policy Analysis and Management, and the Department of Economics, at Cornell University.

In Mexico, sales of soda are climbing two years after the country imposed a roughly 10% tax on sugary drinks.

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