Last week Philadelphia enacted a 1.5 cent per ounce tax on soda to fund the Mayor’s proposed universal pre-kindergarten system and at the same time maybe helping curb the city’s obesity problem. While there’s nothing wrong with Philly wanting to fund education, the tax will have no effect on obesity and will likely not fully fund the programs for which it is earmarked, compelling lawmakers to look for even more sources of revenue in the future. Stemming the hundreds of millions of taxpayer dollars lost each year to waste, fraud, and abuse in the city is a better long-term funding strategy than a discriminatory tax that will fail to deliver on its obesity and funding goals.
In a study published this week by the Competitive Enterprise Institute, we found that real world “sin taxes,” aimed at curbing consumption of sugary foods and drinks largely failed to meaningfully alter consumer behavior. Most notably, the peso per liter (or 10 percent) tax enacted in Mexico in 2014 at first seemed to reduce soda sales, but a recent survey of 8,000 households found no effect on weight. Most surprisingly, researchers found that lower income families and homes with an obese head of household were least likely to reduce consumption of soda in response to the tax. And Mexico is not unique; numerous other studies find that soda taxes, even as high as 40%, were associated with only the smallest change in weight after a year. People who switched from soda to another beverage usually substituted it with equally high-calorie products.
But Mayor Kenney put on little pretense that his soda tax was about revenue and revenue alone. The hope is that the tax will raise $400 million over the next four years with a little less than half earmarked to the pre-k program. The rest will go toward other city programs and employee benefits, most of them existing programs with funding deficits.
(Image credit: phillyvoice.com)
And that’s the rub. Is an additional 86 cents on a 2 liter bottle of soda so terrible? Alone, it’s not that much, especially for middle income households. But, it’s not alone; Philly residents are burdened by seemingly countless taxes—small and large—many of which go to fund the school district’s $2.8 billion budget, but it never seems to be enough. In ‘death by a thousand cuts’ fashion, Philly locals are shelling out more money in total through these small individual taxes than residents of all but one other major U.S. city.