Philadelphia Soda Tax Starts January 1, 2017

It’s official: beginning January 1, 2017, a 1.5 cent-per-ounce tax applies to sugar-sweetened and artificially sweetened beverages sold in Philadelphia, Pennsylvania. This special tax is in addition to the existing 8% tax on all food sales.

Philadelphia is the second city in the nation to enact such a tax; a 1-cent tax per ounce of sugary, high-calorie drinks took effect in Berkeley, California on January 1, 2015. Later that year, the state of Vermont extended its 6% state sales tax to “beverages that contain natural or artificial sweeteners” (July 1, 2015). From a population standpoint, the Philadelphia tax will impact many more people than the other two combined: the City of Brotherly Love is home to more than twice the population of The Green Mountain State.

Soda taxes and health

Rhetoric surrounding soda taxes often focus on health and the need to reduce obesity and diabetes, particularly in children. Since sugary beverages are high on calories and low on nutritional value, they’re an easy target. Yet the American Beverage Association has been quick to point out that soda is not the sole contributor to either obesity or diabetes.

The more neutral Tax Policy Center found that “taxes can change what we eat and drink” but are “an imprecise way to address many nutritional concerns.”

“In principle, taxes can encourage businesses to develop and market healthier products; in practice, most existing and proposed taxes fail to do so.”

In a study on the taxation of unhealthy food and drinks, the Tax Policy Center states that when using taxes to improve nutrition, “the sugar content of drinks would likely be the best place to start.” But it underscores the need to use revenue generated from such taxes wisely.

The Philadelphia City Council plans to use the revenue raised by its soda tax wisely, though not directly to reduce obesity or sugar-induced diseases. The approximately $91 million generated by the tax annually will fund city pre-kindergarten programs, as well as community schools, and parks and recreation centers. It will also add to the General Fund and fund tax credits for retailers that sell “healthy” beverages (details to be released before the start of the year).

Watch the City Council final vote on Soda Tax Bill No. 160176 6-16-2016.

Vermont’s tax on sugary beverages created a compliance nightmare for many retailers. One convenience store owner called it “the most confusing tax policy I have ever come across in all my years in the business.” Retailers are likely to encounter similar issues with the Philadelphia tax.

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