Soda Exposes the Festering Toothache of our Politics

If you want to get a stomach ache, I would encourage you to read the Inquirer's article on the money heavy, astroturf campaign on behalf of that most aggrieved product: Soda.

The food and beverage industry is mobilizing against Mayor Nutter's proposed tax on sweet drinks, with a rush of activity that has City Hall bracing for a "madhouse."

Lobbyists are buttonholing City Council members. Trade groups and the unions have locked arms. Industry ads are sprouting on the air and in print extolling the good corporate citizenship of soft-drink companies. The public has weighed in with hundreds of calls and e-mails.

The Inquirer neatly sums up the arguments lobbyists are making against the tax:

The tax will cost jobs. Working families can't afford it. It's a "money grab" by Nutter. Soft drinks alone don't cause obesity.

Let's take this one by one:

1. The tax will cost jobs.

What jobs will this hurt? The bottling plants? Sorry, I doubt it. Coca Cola bottles in Philadelphia, and sells to the region. People in Philly pay the tax, people outside don't. It is not as if Coke would have an incentive to move out of the city- the same consumption tax would still exist.

Futher, Philadelphia itself is only a small part of the region's market. You would also have to assume that people will not substitute their sugary drinks for other non-sugary, coke-bottled ones. If there is one thing I trust, it is that if they need to, American corporations will figure out how to make sure people buy other drinks.

2. Working families can't afford it.

If this tax is done right, this is the worst argument of them all. All sin taxes, like all sales taxes, are regressive. Does that mean we should eliminate cigarette taxes? Of course not.

3. It's a "money grab" by Nutter.

Money grab? Ha ha ha ha. I really hope the lobbyists make this their center piece. We do all understand there is a deficit, right? And we either raise money or we can shut libraries, lay-off people, close after school programs and pools, and a lot of other stuff. We can argue about whether this is a good tax or well designed or whatever, but, the money has to come from somewhere.

4. Soft drinks alone don't cause obesity.

And Eddie Jordan didn't alone ruin the Sixers. Who cares?

Now, there is a legitimate argument that the way the tax is designed, as a BPT add-on, is not smart. I get that. But does that mean it will not work at all? I don't think so. I would expect that almost instantly, the price in vending machines would go up, the price in gas stations would go up, etc. But, I do get the argument, and I wonder if there is a better way to do this?

The article, however, is most focused on what is about to happen in the city. Lobbyists will write checks to Councilpeople, the teamsters will pack a hearing, letters will come in (and they have, many supposedly not from city addresses), and we will see commercials about poor, poor, poor soda:

Poor soda. I just want to go give you a hug and protect you, you aggrieved individual!

And hey, the ad has a point. As it says, "taxes never made anyone healthy." Right?

Several studies have examined the effects of state cigarette tax increases on youth substance use over the 1990s, with most -- but not all -- finding that higher taxes reduce youth consumption of tobacco... Our most consistent finding is that -- contrary to some recent research -- the large state tobacco tax increases of the past 15 years were associated with significant reductions in smoking participation and frequent smoking by youths.

Oh, right.

We don't often see such clear floods of money into the city, at least on such a short-term, blast basis. But rather than every lobbyist with their hand out, and rather than an ex-Mayor waiving around an empty soda bottle, let's deal with reality:

1) Soda is really bad for you, and
2) We need money, so...
3) We are taxing soda.

The flood of money that is about to rain down on our city is not proof that this is a bad idea, but simply a clear display of the festering toothache of our political system.

Don't think I agree with You on This one, Dan

Admittedly it's a close call. Coca Cola happily sells poison. No disagreement there. I'd be happy to ban Coke entirely, not to mention their advertising and lobbyists. But details matter. This tax, as it's structured, seems to be a missile aimed at small, neighborhood groceries that can't spread the cost around as well as the big boys do by adding a small, nearly unnoticeable charge on to a wide variety of other products. Admittedly the pricing problems of small operators has good as well as bad results in this case. If more of the tax is actually imposed on the sugar water in smaller shops, that will increase the desired impact of deterring consumption among those shops' customers. But more of the business fall off will also happen there. Everyone will not stop drinking the goop. They may go elsewhere for it, and for other stuff as well. That will be bad for neighborhood businesses and for neighborhoods.

Admittedly I don't know the extent to which a large tax like this will affect shopping behavior. And I have been duly skeptical in the past of the extent to which taxes affect business or consumer behavior. But we now have the irony of the Mayor, who has been consistently on the other side of the argument about taxes and behavior, poo-pooing the notion that this particular tax, will have a negative impact on certain businesses.

Now if we coupled this tax with some other tax break that we could give to small business, we might have an answer. It will be uphill to do this because the thing that remains consistent about the Mayor is that he never saw a tax on big business that he didn't get up on the table and scream bloody murder about. In fact, he is insisting that the soda tax -- along with his trash surtax -- be permanent so that he can resume his across the board cuts in the BPT in three years. Nevertheless there is some interest in restructuring the BPT in Council. I'd like to see where it goes before reaching final conclusions on the Mayor's sugary drink concoction.

I agree with Stan. The goals

I agree with Stan. The goals of the tax are good, but I don't see any convincing argument that it will work. Instead of a excise tax that consumers will actually see, this would essentially be a big increase in the BPT for a very small slice of businesses. I suspect very few businesses will actually pass along the costs directly to consumers, instead increasing prices on everything.

The way the city SHOULD have done this tax was to go through the state legislature and have it added onto the sales tax. But, politics being politics, the mayor didn't want to go down that road again.

If the city does really need more revenue, it seems to me that a fairer way to do this would be to increase the BPT across the board, at a much smaller rate than the soda tax.

---
Check out "It's Our Money"

An alternative

I agree that there is a good chance that it could hurt small businesses, but I'm not sure how else to enforce it fairly because I do think it is a good tax.

An idea to calm people down is to not tax any of these drinks that are bottled in Philadelphia. This would kill the job loss excuse, and maybe even bring more jobs in. I know Coke, and Pepsi have bottling plants in Philadelphia, but I'm not sure if they bottle all of their products here. It would encourage some of the smaller companies to move here, and they could be given tax breaks to build. Construction jobs and permanent jobs are sorely needed here, maybe this is a way to get them back.

it's not likely that would be legal

It would clearly be illegal to the extent that it imposed a tax on out of state companies while shielding PA companies. That's under the US Constitution's commerce clause. To the extent a tax was imposed on non Philly companies based in other parts of PA, it would probably offend the uniformity clause of the PA Constitution. And, of course, it wouldn't solve the other problems that some of us have discussed relating to the poor way this tax has been put together.

I agree with Stan. Such a

I agree with Stan. Such a tax would not survive a constitutional challenge.

I believe the health of this city

matters more than question of best practices when taxing its citizens. Soda is very very bad, and it's sugary effects hurt the more vulnerable populations such as poorer folks and children, who are the majority of it's drinkers. According to a study linking soda taxes with reducing obesity: http://www.philly.com/inquirer/home_top_stories/87096957.html

"The impact of a tax on beverages with added sugar in Philadelphia would likely be greater, said study coauthor Barry Popkin, a professor of nutrition at the University of North Carolina at Chapel Hill, because inner-city children, blacks, and Hispanics all drink more soda than the typical American and also have higher rates of obesity."

Although the tax could have been made better, and may face an uphill climb against the money of the beverage lobby, I'm glad that the Mayor has put something on the table that addresses both the city budget and an important matter of public interest.

mixed feelings

i don't think the tax will work for a variety of reasons, the primary one being that people will wise up quick and stop buying soda. I've seen people argue that it's a tax on the poor, who often can't afford milk and juice, and I'm sympathetic to that. but if milk and juice are too expensive comparatively, many will give their kids water (an underrated drink). so i don't think the tax will raise the revenue they expect.

On the other hand, i have no love for the soda industry (even if i AM partial to the occasional coca-cola). i used to work at Penn Dental writing responses to "ask the dentist" questions, and what i learned about soda is nauseating. the sugar and corn syrup are bad enough, but the phosphoric acid in these beverages is even worse. it eats away not only at your teeth, but at your bone mass as well.

Finally, this has nothing to do with public health, as the mayor claims. nothing.

Is there any evidence

that a tax of a few cents on soda will, in any way, reduce the amount of soda consumed by kids (or adults) at risk for obesity? I doubt that this tax will affect behaviors at all.

To the extent that the money raised might go towards medical treatment for obesity or diabetes, the tax makes sense to me - but as a more general revenue source it seems to me to be unnecessarily regressive.

I'm not sure that all "sin" taxes are equally regressive. If the tax won't reduce the consumption of soda, then it will have no benefit other than raising revenue. I know that someone suggested it as a joke, but if it is true that the soda tax won't reduce consumption of soda, why not have a "latte tax," or increased taxes on equivalent "luxury"-type product?

if this tax

was nation wide it would be a great tax. the empty callories in soda make it one of the main causes of obesity and type 2 diabeties. besides the increased medicade costs and private ins costs , anyone who is obese and has type 2 diabeties AUTOMATICALLY qualifies for ssi disability of 687 a month. if the tax doesn't reduce soda consumption the rev raised from diabetic soda drinkers would defray the costs of their ssi payments or if it did reduce soda consumption money would be saved due to the lowere ssi payments and medicade costs. a win win situation.

Maybe, except it isn't national

If it were national and the revenues were directed towards tax funded social services - fine with me. There's something to be said for the argument that people should assume responsibility for the costs to society of their actions, and taxing soda nationally would be a way to get closer to that goal. Tax cigarettes more to cover public medical services used disproportionately by smokers. Tax gasoline more to cover the vast array of costs to society caused by automobile travel.

But the question is whether this makes sense as a local tax. I've heard that some of the revenue will be directed towards local medical services for people whose health, it could be argued, may be negatively affected by drinking to much soda. But my assumption is that it won't reduce the consumption of soda - so why not tax products that are disproportionately purchased by wealthier people?

If the tax is passed on,

If the tax is passed on, then yes, I think like any consumption tax, it will lower consumption. And 2 cents an ounce is pretty hefty. That is an extra $2.88 cents for a 12 pack of coke.

Yeah, well, Mr. Google is pretty ambiguous

there's this:

http://news.yahoo.com/s/nm/20100308/hl_nm/us_food_tax

CHICAGO (Reuters) – U.S. researchers estimate that an 18 percent tax on pizza and soda can push down U.S. adults' calorie intake enough to lower their average weight by 5 pounds (2 kg) per year.

The researchers, writing in the journal Archives of Internal Medicine on Monday, suggested taxing could be used as a weapon in the fight against obesity, which costs the United States an estimated $147 billion a year in health costs.... They compared data on food prices during the same time. Over a 20-year period, a 10 percent increase in cost was linked with a 7 percent decrease in the amount of calories consumed from soda and a 12 percent decrease in calories consumed from pizza.

The team estimates that an 18 percent tax on these foods could cut daily intake by 56 calories per person, resulting in a weight loss of 5 pounds (2 kg) per person per year.

and this:

http://www.forbes.com/2009/09/16/nejm-health-obesity-cigarettes-opinions...

Thomas Frieden, the president's nominee for director of the Centers for Disease Control and Prevention, argued in an article for the New England Journal of Medicine last April that "a penny-per-ounce excise tax could reduce consumption of sugared sodas by more than 10%."

But then again, there's this (from the above link):

.... while there has been a great deal of research tying soda consumption to weight gain, there has been a surprising dearth of research on whether soda taxes work, even though they have already been implemented in 33 states (indeed, the five most obese states--Mississippi, Alabama, West Virginia, Tennessee and Oklahoma--all have soda taxes, while three of the least obese, the District of Columbia, Massachusetts, and Colorado, have no soda taxes). But two new studies by a trio of researchers--Jason Fletcher, a public health expert at Yale, and David Frisvold and Nathan Tefft, economists, respectively, at Emory and Bates--mine real-world data to provide some much-needed insight into the debate.

In "Can Soft Drink Taxes Reduce Population Weight?" (which will be published in Contemporary Economic Policy), the authors examined how changes in states' taxation rates from 1990 to 2006 affected body mass index, a measure of body fat based on height and weight. They found that a one percentage point increase in the tax rate was associated with a decrease of 0.003 points in BMI. (To put this into context, the National Institutes for Health defines a person as having a normal weight if their BMI is between 18.5 and 24.9, and as being obese if their BMI is 30.0). As the researchers note, even a large tax increase of 20 percentage points might not have a substantial effect on population weight.

They also did a "back-of-the-envelope" calculation suggesting that a 58% tax on soda, which is equivalent to the average federal and state taxes on cigarettes, could lead to a reduction in the mean BMI in the U.S. by 0.16 points. This, if not trivial, is probably not politically viable. New York Governor David Paterson recently failed to push through an 18% soda tax through the state legislature.

In a second paper, which is under review for publication, Fletcher et al. looked at the impact of soft-drink taxes on children's and adolescent's consumption and weight. While they found a moderate decrease in consumption, it was offset by children switching to higher-calorie whole milk and other sweetened drinks. This may be a more nutritious development, but it did not lead to any weight loss. "The evidence to date," they write, "is that soft-drink taxes are ineffective as an 'obesity tax.'"

My intuition tells me that a soda tax will not reduce consumption as much you might think (people will just spend less on healthier foods), and that to the extent that it does reduce consumption, it will not have significantly positive health outcome.

I don't think this study is

I don't think this study is necessarily supportive for Nutter's soda tax. It assumes that it will be levied at the point of sale, not on the merchants that sell these items.

Chicago, for example, does it at the point of purchase through a sales tax. That's not what the city is proposing.

---
Check out "It's Our Money"

The Paradox of the Soda Tax

Some Lattes made at Starbucks bump the ceiling at 500 calories. A Coke Classic at 16 ounces, comes out at 193. So, we could be progressive in our tax policy by going that way, but....I won't wait.

There is substantial evidence from cigarette taxes that consumption does down when the taxes go up, especially among younger smokers. I suppose most of us would think cigarettes are deadlier than sodas, but Ian makes a good point that a steady diet of soda will help your health crap out in less obvious but just as deadly ways, but it's the only comparable to this discussion, I think.

Brendan's point is well taken as well and provides the paradox. When cigarette taxes go up, receipts go down. I plugged this spreadsheet into my Excel, and did the computations. Oh, the southern states tax butts least, and revenues are going up, but they have the worst health ion the country.

So, we have a line of good logic on this topic from Stan's observation that this hits small business who have razor-thin profit margins, to Brendan and Ian. This was a pause that refreshed...

Joshua Vincent
www.urbantools.org
www.ourcommonwealth.org
Phree Philly

The benefit of raising cigarette taxes isn't only

that it would increase federal revenues more generally - but that it would raise revenue specifically from people who are more of a burden to society by virtue of their habit of smoking. So - even if consumption goes down enough to offset the tax revenues (which doesn't seem to be even close to being the case with cigarette taxes), there's still a logic to targeted taxes on unhealthy products - as long as the revenues go towards offsetting the costs to society from the consumption of those products.

A difference that makes no difference

I share Stan's suspicions, but I suspect that his analysis of this tax is wrong.

Who pays taxes is a really tricky subject. In college I took a three week unit on tax incidence. It is not always obvious who pays certain taxes, including corporate income taxes. It depends a lot on the elasticities of demand and supply for various goods.

So without getting out my textbook and notes, and spending more time than I have now, I'm not prepared to say I know how this tax would work.

But, off the top of my head, I don't see any real difference between a per once gross receipts tax on the sale of sugary substances and a per once sales tax.

Stan is worried that businesses that sell a variety of goods will not increase the price of soda but will pay for the tax out of their revenues as a whole.

But if a business thought that the impact of a sales tax on its revenues would cut into profits, they could reduce the pre-tax price of soda so that the after-tax price remained the same. They would thus pay the tax out of their revenues as a whole.

So I can't see how the type of tax makes any difference. The question then is whether the impact of this tax is more problematic for small businesses than large ones.

In response let me say first that if it is, then the problem arises for cigarette taxes as much as for soda taxes. And I agree with Dan: when the public consequences of a consumption are good, then I'm much less likely to worry about whether the tax is regressive. And drinking soda, like smoking, is a problem that is likely to afflict working people more than middle class people anyway.

And, second, pretty much all the businesses that sell soda, big supermarkets as well as corner stores, are low profit margin businesses. And reduced consumption of soda will most likely lead to increased consumption of other drink which means that their revenues will not be changed all that much if they pass the tax on to consumers. So I suspect they will all do so.

As for Brendan's point that the tax won't work because it will lead to decreased consumption: if that happens, the tax is working. If, as a result, it doesn't bring in enough revenues, well then we'll have to do something else. But we will have attained an important public good anyway.

Except - even if it does reduce consumption significantly

(which I'm pretty dubious about anyway) the tax won't be "working" if that reduced consumption doesn't result in significant and positive health outcomes.

As indicated by the studies I linked above - it's taking a huge leap of faith to think that even significant reductions in soda purchases would lead to a outcomes such as a reductions in obesity or diabetes complications.

Without such outcomes - then the only real benefit of a soda tax is increased revenue for the city. Rather than assuming some larger health benefit that is very likely not to materialize, why not just tax an item that will more likely shift the burden to people with higher incomes? Same revenue through a less regressive means.

More sin taxes.... where will this lead us?

It seems to me we have already embarked on a slippery slope that will lead us to more and more intrusion
by government and more taxes... sort of like a junkie always needing his next fix.

If we go back to the national tobacco lawsuit--- I saw several problems with both the basis for the suit as
well as how the settlement was structured. In this post I'll just address my second concern. What should have
happened is that the judge should have demanded that the settlement monies going to the states be earmarked and
restricted so that those dollars could only be spent remedially to address the illnesses and the cost of treatment
for the illnesses that the state's claimed were being shifted to them unfairly. but instead, as I understand it,
these dollars just basically went into the general funds and have been consumed for purposes having nothing to do
with the lawsuit.

Nutter's sugar tax is out and out a plain ole tax. Trying to dress it up as a health reform is simply dishonest.
Only a small portion of the funds will go toward remediation or education of the sins which the tax rests on.
Again... if obesity is worth fighting... and worth a sin tax of it's own... then ALL of the funds should be dedicated
to it's eradication.

I'm also concerned because I think it puts us well on a slippery slope. Next year... a TastyKake tax? Or a tax on Stock's (Lehigh Ave) pound cakes? Cheesesteaks anyone? What about raw sugar itself? Eggs? Milk? Ice cream?
red meat? All of these products are known to have adverse or potentially adverse health impacts.

And isn't it somehow perverse that we woud choose to fund government on people doing quote "bad" things? Do we want to finance public goods and services with "blood" money? Ironically, the government's reliance on these sin taxes puts it in the awkward position of if everyone did the "right" or "healthy" thing... then we would not be able to finance our public expenses since the "sin" taxes themselves would dry up.

It's part of the reason I also have some ethical concerns about our commonwealth collecting taxes or profiting from lotteries and gambling adventures.

MSL

if it was about the health of our citizens....

I was just thinking. If we are going to have a sugar tax... let's demand that it be earmarked and that the can only be spent on programs\steps that help to resolve the problem. None of the funds should go into the general kitty.

Then you could start to get creative. Reward people for buying a bicycle. Reward people for actually USING a bicycle... I don't know... maybe we would have to install certified odometers and then reward people so many cents per mile...

Use the fund money to rebate gym memberships... or the city could institute it's own "BIGGEST LOSER" program... so many dollars per pound lost per citizen.

All from the proceeds of the sin tax.

Problem still remains that costs of collecting the taxes and then spending the funds would not itself be insignificant.

Still not sure that this is what I want my city government doing.

MSL

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