Soda Tax to Roll Out in First Major City—Philadelphia

June 16, 2016 Updated: October 5, 2018

If you shop for soda in Philadelphia next year, you’ll be contributing to the city’s prekindergartens.

That’s where the money will go from the city’s new beverage tax targeting both sugary and diet drinks.

The city council passed the tax on June 16, with a 13–4 vote.

Philadelphia thus becomes the first major city in the United States to adopt such a tax.

The tax is 1.5 cents per ounce. That means the soda distributors will have to pay the city about $1 for each 2 liter bottle they sell and 30 cents for each 20-ounce bottle.

The city expects to raise $91 million via the tax in the next year.

The only other city with a soda tax is Berkeley, Calif., at 1 cent per ounce.

About half of the tax was passed to customers as a price increase 3 months after the tax was implemented, according to researchers from the University of California, Berkeley.

Efforts to pass similar taxes elsewhere have failed—for example, in New York and San Francisco.

What makes Philadelphia different is that it pushed the tax to fund pre-K, community schools, and recreation centers. Previous attempts at taxing soda usually argued from the perspective of public health.

Two out of three Philadelphia adults and two out of five children were considered overweight or obese in 2010, according to the city’s public health department.

But Mayor Jim Kenny said last week that Americans generally reject other people telling them what’s healthy for them, so his administration tried to stay away from that. He said any health benefits coming from the tax are just a bonus.

Senator Bernie Sanders criticized the tax for disproportionately affecting low income and middle class people, who are more likely to drink soda.

Indeed, when a soda tax was implemented in Mexico in 2014, prices increased and low-income Mexicans reduced their soda purchases the most.

Yet low-income Americans are also suffering from obesity the most. Counties with poverty rates of more than 35 percent had obesity rates 145 percent greater than wealthy counties in 2010, according to an article by Dr. James Levine, Mayo Clinic obesity researcher.

The Philadelphia tax was also criticized for hurting jobs. Decreased sales would hurt retailers, which may cost jobs. It would also cost jobs if soda companies decide to move their operations out of the city.

The soda industry sponsored ads against the tax, while former New York City Mayor Michael Bloomberg and Texas billionaires John and Laura Arnold supported ads in favor of the tax.

Bloomberg, who couldn’t push through a ban on big portion soda cups in New York City while he was mayor, also helped to fund the successful push for soda tax in Berkeley.

Immediately after the vote, beverage bottling businessman Harold Honickman promised to fight the tax in court, saying he might file a lawsuit as soon as this weekend.

The Associated Press contributed to this article.

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