Why Philly Needs the Sugary Drink Tax

Originally appeared on the Third and State Blog on May 25, 2016

7325116-3x2-940x627As we move closer to a City Council vote on the sugary drink tax proposal, I want to offer some final thoughts about the idea and correct some misapprehensions about it:

1.While the tax itself is regressive, and the Pennsylvania Budget and Policy Center almost always opposes regressive taxation, the program as a whole is not regressive. To begin with, the opponents of the tax are simply wrong about one aspect of it. They have been arguing that it is doubly regressive because members of low-income families consume sugary drinks at higher rates than middle- and high-income families or that African-Americans drink sugary drinks at higher rates than white people (and keep in mind that these are two groups not one). Those are myths. The research on this issue is equivocal and does not support that claim.

2. More importantly, the focus on just the revenue side of the Mayor’s program is the kind of fundamentalism that all of us should reject. The Scandinavian social welfare systems that Bernie Sanders and others admire are funded in large part with a Value Added Tax (VAT), which is a sales tax on steroids. The VAT may be a regressive tax, but the whole system very much benefits poor and working people. Much the same is true of Mayor Kenney’s proposal. The tax falls harder on poor and working people. But the benefits of pre-K and community schools and playground and recreation center renewal are great and very much go to those lower on the income scale. Moreover, the tax is not all that high and is totally avoidable. The average person who reduces his or her consumption of sugary drinks by half will pay about $21 a year.

3. But that does not mean the sugary drink tax is an unreliable source of income in the near future. To think so is to take a very simple-minded approach to the issue. At best, the sugary drink tax will reduce consumption by 50% over five years. If we are lucky, over ten years there will be further reductions. But, by then the economic benefits of a substantial reduction in the consumption of sugary drinks will be felt among Philadelphians who will be paying less to manage chronic diseases and by the city which will have to spend less to treat those diseases in our health centers.

4. Those economic benefits will arise because the benefits of the sugary drink tax are striking and substantial. And while there is an element of paternalism in a tax that discourages unhealthy behavior (just as there is for cigarette and liquor taxes), the paternalism is not class or racially based. Whites and middle-to-high-income households (and these are two groups not one) consume sugary drinks at high rates as well. What is true is that Blacks and those with low incomes suffer from diabetes and heart disease at higher rates than others—but there are many other causes of that disparity. So the health benefits of a reduction in sugar consumption may flow more to Blacks and those with low incomes.

5. The sugary drink tax is not the only way the city and state are trying to encourage healthier eating habits. There is a very substantial, and successful, effort to bring supermarkets into low-income communities. The city and non-profits are also funding programs that encourage corner markets to improve their offerings and direct consumers to more nutritious and healthier foods. And the creation of this tax, like the creation of tobacco taxes, is just one part of a larger effort to inform people about the dangers of sugary drinks.

6. The impact of the sugary drink tax will thus be felt far beyond Philadelphia. And that’s why the beverage industry has been putting so much money into their dishonest campaign against Mayor Kenney’s proposal. If they lose here, other cities will be emboldened to take similar action. And the health of hundreds of thousands of Americans will benefit.

When I first started looking at this issue, I was inclined to oppose this regressive tax. But after a few weeks of study and after reading fifty academic articles on the economic and health impact of the tax, I changed my mind. This is a tax all progressives should support.

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