Five lessons learned from other places that passed soda tax
May 20, 2016 | Jake Blumgart | Philly Voice
Before summer blockbusters run on the big screen, audience members are bombarded with ads against “the grocery tax,” as the soda industry prefers to call it, while our city’s proposed sugary drinks tax is discussed in publications from NPR to the New York Times.
Kenney’s proposal, which would cover soda, “juice” drinks and sports drinks but not diet beverages, would induce a levy of three cents per ounce for distributors rather than at the point of retail. But it is widely believed that the costs will then be passed on to retailers and then consumers. In addition to raising the $400 million over five years for pre-K, parks and rec rehabilitations, and other worthy causes, it is also thought that the consumption of soda will decline.
The soda industry will fight down to the last cartridge to prevent Kenney’s proposals from coming to pass. But it remains unclear whether his tactic of emphasizing the programs that will be funded by the revenues, rather than the health benefits, will prove a winning one.
City Council has to pass its own version of the budget by May 30. Then Kenney has about a month to approve, veto or decline to sign the budget – by June 30. A mayoral veto can be overridden by a council supermajority (12 members). If the mayor fails to act – refusing to either sign or veto – the budget automatically goes into effect.
Philadelphians confused or worried about the outcome do have several points of reference to consider. Just two years ago Berkeley, California became the first American city to pass a tax (one cent per ounce) on sodas and other sugary beverages. In 2014 Mexico passed a one peso per liter tax on soda, while several states have had much smaller taxes on the beverages for decades.
We looked at the research and the campaign literature to find the following lessons learned in our predecessors' efforts.
TAX ON DISTRIBUTORS = MORE EXPENSIVE SODA
“It’s been fantastic, we’re really happy with the results this first year,” says Tom Bates, the mayor of Berkeley. “We've taken in to date $1.4 million and we anticipate that we'll see an increase in the tax revenues. But it has also raised the price of sodas, so for the people who buy a sugar-sweetened product, it costs a little more here than they do somewhere else.”
Early reports were not so sanguine. An August 2015 National Bureau of Economic Research working paper reported that retail prices hadn’t increased much. Only 22 percent of the tax was being passed on to the sale of Coke and Pepsi product in the city. “We expected to see the tax fully passed through to consumers,” wrote researcher John Cawley. “In contrast, we find that less than half, and in some cases, only a quarter of it is.”
But a different study, in the American Journal of Public Health, found very different outcomes. Published a few months later than the NBER study, but covering a similar time frame, it found that the tax had increased the price of soda and other sugary beverages in comparison with neighboring Oakland and San Francisco. In Berkeley, the researchers found price increases that were almost 70 percent of the excise tax for soda and almost 50 percent for other sugar-sweetened beverages. “This first empirical evidence of early pass-through at the city level foretells pass-through of SSB [sugar sweetened beverages] excise taxes in other cities,” the report concludes.
Asked about the disparity between the findings of the two papers, Jennifer Falbe of the Berkeley University School of Public Health (one of the authors of the second paper), responded to PhillyVoice via email.
“Dr. Cawley's group collected only posted prices,” writes Falbe. “Our data collectors found that many locally owned grocery and corner stores did not post prices on their products. We collected both posted and non-posted prices (asking cashiers for prices if they were not posted). …Our analysis also included Oakland as a comparison city (in addition to San Francisco), and we assessed an overlapping but somewhat different set of beverages. We also focused our price collection in lower income neighborhoods.”
BIG SODA IS GREAT AT REPRESSING THESE POLICIES
Mayor Kenney is no doubt aware how skilled the soda industry is at repressing these taxation efforts. After all, he voted twice against attempts by his predecessor, Mayor Michael Nutter, to implement smaller versions of the current tax.
Councilman Kenney isn’t the only one who decided not to beef with the soda giants. In 2009, the Obama Administration proposed a soda tax to help pay for what would become the Affordable Care Act. The amount spent on lobbying activities by Pepsi, Coke, and the American Beverage Association shot up from $3 million in 2008 (roughly the same amount it had been for the previous decade) to more than $37 million. The proposal was quickly dropped.
The battle hasn’t gone much better at the city level. Philadelphia isn’t the only city where the soda industry has crushed legislation that would regulate or tax sugary drinks. Even in the San Francisco Bay Area, taxes on soda were defeated in Richmond and San Francisco itself, although in the latter case a majority of voters approved the initiative.
Observers believe the Berkeley effort was successful because its backers waged a door-to-door effort to educate voters on the tax and its implications. There are numerous studies that show that in-person voter outreach is far more effective than, say, TV advertisements. And that seems to have borne fruit in Berkeley.
“In Berkeley, the campaign was able to counter that effectively because real people showed up and said, loud and proud, that kids’ health had to be the first concern,” says Lori Dorfman, director of the Public Health Institute’s Berkeley Media Studies Group. “They dismissed nonsense arguments from the industry in face-to-face conversations, on the phone and in community meetings. And it was clear who was winning just driving through Berkeley…when every lawn sign was for Berkeley vs. Big Soda.”