Pop goes the soda tax

The notion that raising the price of sugary or fatty foods will convince people to consume less of them, and hence reduce obesity rates, has exploded in popularity in recent years. Hungary, Mexico and France now have health-related food or beverage taxes. So do many U.S. cities, including Berkeley, Calif., Boulder, Colo., Philadelphia and (starting next year) San Francisco. Despite eager claims from proponents, however, the impact on obesity is measurably zero in all cases.

In Mexico, for example, advocates claimed a peso-perlitre soda tax imposed in 2014 would result in an immediate nationwide weight loss of up to four pounds per person on average. It hasn’t happened. And while soda consumption in Mexico fell in the immediate aftermath of the tax, it’s now on the rise once more.

There are many reasons for the widespread failure of soda taxes to reduce collective waistlines. People tend to seek a constant diet, and when faced with higher prices for particular products they will often look for alternatives. Pop might be substituted with chocolate milk or fruit juice. Shoppers may also frequent discount stores or buy bargain brands. Soda also comprises a very small component of most diets. Since obesity is the result of a complicated web of biological, social, geographic and other factors, it’s just naïve to expect higher prices on one vilified product will cause a miraculous change in everyone’s weight.

Beyond the inability of soda taxes to reduce overall caloric intake, however, recent evidence points to the many ways in which food and drink taxes can cause unanticipated and entirely unpleasant side effects. Consider Philadelphia, which this past January imposed a tax of 1.5 cents (U.S.) per ounce on all sugary and diet soft drinks. It was the city council’s third attempt at such a policy. Earlier efforts tried to sell the proposal as a healthpromotion tool and failed outright. Only when proponents claimed soda tax revenue was necessary to fund pre-kindergarten education did the idea gain political traction.

Because Philadelphia’s soda tax only applies within city limits, price-conscious consumers responded immediately by shifting all their grocery shopping to suburban stores unaffected by the tax. This spontaneous outbreak of cross-border shopping created a wave of detrimental side effects, says Philadelphia’s city controller, Alan Butkovitz, an elected official who acts as a fiscal watchdog at city hall. According to Butkovitz’s research, large supermarkets within the city limits suffered an average US$3.5-million drop in sales over the first six months of 2017, compared with the pre-tax era. And more than half of all city beverage retailers, including convenience stores and restaurants, reported sales declines of greater than 10 per cent due to the tax. Meanwhile, sales and foot traffic at suburban stores outside the tax boundaries have grown substantially.

Beyond the obvious and arbitrary impact this has on city store owners, the tax poses an even greater threat to those living in the city’s downtown core. If the large drop in sales continues, many inner-city supermarkets will be forced to close, cutting off access to healthy food options among low-income Philadelphians who lack the ability to shop at far-flung suburban stores. “This tax is impairing the ability of residents to get fresh fruit and vegetables,” says Butkovitz in an interview. He argues the tax could directly lead to the creation of “food deserts” in certain poverty-stricken neighbourhoods, meaning nutritious food is entirely unavailable.

And despite initial promises used to sell the tax to the public, it now turns out only half the revenue being raised is currently earmarked for the city’s pre-kindergarten program, Butkovitz says. The rest goes straight into the city’s general revenue fund, meaning it functions as a basic tax grab. “The city has created a new tax that falls most heavily on its poorest people. It is a major hypocrisy,” he says.

Philadelphia’s soda tax may thus make healthy food unattainable in some areas of the city, drive business out of its inner core and punish its most vulnerable residents. If that’s not enough of a perverse outcome, consider that it has also made beer a cheaper option for Philadelphians than soda pop.