Soda Taxes Are Finally Succeeding. Here’s How to Keep the Winning Streak Going

Soda taxes are gaining ground in the US. Since the first such tax was adopted in 2014, seven cities and one county have approved a tax on sugary beverages. While there are differences among these new tax measures, they all share a common goal of reducing the rate of obesity by raising the price of sugar-sweetened beverages and reducing how much people drink. And Americans drink a lot of it. According to Marion Nestle’s Soda Politics, about 9 billion gallons of non-diet soda were available for consumption in the US in 2012, enough for 95 billion 12 ounce cans. Almost all of the calories in soda come from sugar, and each of those 12 ounce soda cans contains close to double most people’s daily sugar allowance.

What’s So Bad About Sugar?

Why is sugar such a scourge? According to Nestle, many studies provide strong evidence that sugary drinks lead to obesity, particularly in children, and obesity raises the risk of Type 2 diabetes. The soft drink industry, represented by the American Beverage Association (ABA), claims that the real cause of the rise in obesity is a lack of physical activity.

Of course, a reduction in sugary drink sales is not helpful for the bottom line of soda companies, and so taxes on their products are a real threat. The industry routinely spends millions of dollars on anti-tax campaigns when cities and towns consider city council proposals or ballot initiatives. The Wall Street Journal estimates the industry spent more than $100 million to defeat more than 20 soda-tax proposals across the country from 2010 to 2014.

The Link Between Soda Taxes and Declining Soda Consumption

While there is limited research into how effective sugary beverage taxes are once enacted, since their adoption is so new, early studies on Berkeley’s city tax and Mexico’s national tax show evidence of real decline in soda consumption.

There is, however, a growing body of research that models the impact of sugary beverage consumption from potential taxes, and these studies suggest strong evidence that such taxes can have positive health impacts. In one example, researchers found evidence that a tax on beverages high in sugar may be associated with a decline in their purchase among US households with a preschool child. It’s a compelling conclusion given that children are particularly vulnerable to the health impacts of sugar-sweetened beverages.

Pro-Soda Tax Support (and Opposition)

Stung from so many defeats, funding from pro-soda tax supporters has begun to pour in, namely from former New York City Mayor Michael Bloomberg. After the failure of his citywide ban on jumbo-sized sugary drinks, Bloomberg set his sights on Berkeley, California and donated $657,000 to pay for ads supporting the city’s 2014 soda tax ballot initiative. The ABA in turn spent $2.4 million to oppose the tax. The result was the first victory for sugary beverage tax supporters, and a new pattern emerged: Bloomberg and the ABA spend large sums of money on campaigns for and against each new soda tax proposal. The difference is that the pro-soda tax camp is now winning.

How Successful Are Recent Soda Tax Initiatives?

Many of the recently approved soda taxes were scheduled to go into effect this year, so let’s take a look at how each of the eight measures stack up and how successful, or not, their first days have gone:

Berkeley, California

Berkeley is the first US municipality to successfully enact a soda tax. In 2014, 76 percent of Berkeley residents approved a ballot measure to add a one cent tax per ounce on the distribution of sugary beverages. This was an historic win for proponents of soda taxes because before the 2014 approval, 40 other cities and states had tried and failed.

The city established its Sugar-Sweetened Beverage Product Panel of Experts to advise the city on how to spend the tax revenue, including health- and nutrition-focused programs. A study released in April 2017 looked at the before and after effects of the first year of the tax and found a nearly 10 percent drop in the purchase of taxed sugary beverages, along with an increase in sales of untaxed beverages, particularly water.

Philadelphia, Pennsylvania

In June, 2016, the Philadelphia City Council approved — by a vote of 13 to 2 — a 1.5 cent per ounce tax on the distribution of sugar-sweetened and diet beverages. The long journey towards the approval dates back to 2010 when then-Mayor Michael Nutter failed to get the city council to pass a 2 cent per ounce soda tax in the budget as an anti-obesity measure. The reason? The ABA fought back by pre-emptively donating $10 million to the Children’s Hospital of Philadelphia for obesity prevention programs, which convinced the city council to withdraw the proposed tax.

Fast forward to June 2016, when the city council approved a 1.5 cent per ounce tax on sugary beverages to help fund a pre-kindergarten program, community schools, park and recreation systems and the city’s general fund. The measure went into effect this past January and survived a lawsuit rejected by the Pennsylvania Commonwealth Court claiming that the tax was a form of double taxation. Despite the tax being just a few months old, opponents are questioning the results, at least financially, as the revenue generated for the city has been less than projected. This means that people are purchasing less soda than expected, which is of course the point of the tax.

San Francisco, California

San Francisco tried and failed to pass a soda tax in 2014, even though it received 55 percent of the vote. On Election Day In 2016, it passed with 62 percent of the vote. What changed? First, the tax was reduced by a cent, but more importantly the approval threshold was lowered from two-thirds majority to a simple majority. California law is unique in that it requires taxes that go to a specific purpose — say, a child nutrition program — be passed by a two-thirds vote while general fund taxes need only be passed by a majority vote. Through the measure the city created a committee to advise city leaders and submit an annual report to analyze the impact of the tax and make recommendations on establishing or funding programs to reduce the consumption of sugar-sweetened beverages.

Oakland, California

The Oakland soda tax ballot measure received 61 percent approval in the 2016 election and, like in San Francisco, the funds go to the city’s general fund. Oakland also established an advisory board to make recommendations to the city council on setting up or funding programs to prevent or reduce the health impacts from consuming sugar-sweetened drinks, and also to report on the implementation of the new tax. In May this year, two months before the new tax began to generate revenue, Mayor Libby Schaaf released a proposed budget for the city that would have used the soda tax funds to fill a large city budget gap instead of helping to fight childhood obesity and soda consumption as promised. Push back from tax supporters was swift and the proposal was ultimately scrapped.

Albany, California

A 2016 ballot measure proposing a one cent per ounce tax (https://www.albanyca.org/departments/finance/sugar-sweetened-beverage-tax) was approved with 71 percent of the vote. Again, the revenue would go to the city’s general budget, but unlike San Francisco and Oakland, the other two California cities that approved a soda tax in 2016, the measure did not establish an advisory committee related to the funds. Instead, the city council is required to hold a public process and solicit “advisory recommendations” every year to consider how best to spend the funds raised by the tax.

Boulder, Colorado

In the 2016 election, 54 percent of Boulder voters supported a two cent per ounce tax on the distribution of sugary beverages; the steepest such tax in the nation. According to the city, revenues generated by the tax must be used to “improve health equity in Boulder through the support of health promotion, general wellness programs and chronic disease prevention.” The measure also requires that the city establish an advisory committee to help determine how to use the new revenue for health programming and provide input on how best to engage residents most affected by chronic disease and lack of access to health services.

The measure went into effect on July 1 and is expected to raise $3.8 million in its first year. There is room in the measure for granting exemptions, and some of those subject to the tax are already seeking them – such as producers of kombucha (many varieties of which have 5 grams of sugar per 12 ounces). The University of Colorado Boulder has already been granted a one-year exemption, much to the consternation of soda tax supporters.

Cook County, Illinois

The county board of not just any Illinois county, but the one that Chicago calls home, required a tie-breaking vote from the board president to approve a one cent per ounce soda tax in November 2016. Since then, the rollout has been troubled, to say the least. Instead of being earmarked for specific health or community-specific needs as other council-approved taxes in the US have been, the estimated $224 million in revenue is slated to help the county fill a massive budget gap and avoid layoffs. Lawsuits from tax opponents, however, have kept the tax from going into effect on July 1 as anticipated. The tax is now set to go into effect on Wedesday August 2. (Update: The Cook County Board repealed the short-lived soda tax on October 11, 2017 after a poorly planned rollout by the county and a soda industry campaign that poured millions into opposing the new tax.)

Seattle, Washington

In June this year, by a vote of 7 to 1, the Seattle City Council approved a 1.75 cent per ounce tax — about $1.18 for a two liter bottle of soda — on sugary beverages. The tax is expected to raise about $15 million per year. Some of the revenue will be marked for the city’s Fresh Bucks program to double the value of food stamp (SNAP) dollars spent on fruits and vegetables at farmers’ markets. Food banks and soup kitchens will also be eligible to receive funds generated by the tax. According to Tim Burgess, the city council member who led the soda tax approval, opponents had until July 5th this year to get a referendum on the November ballot. The date has passed and no petition was submitted, so as of January 1, 2018, the tax will go into effect.

How to Ensure More Soda Tax Wins

There are now nearly 9 million Americans who are, or will soon be, subject to soda taxes. That’s a stunning turnaround from November 2014 when the number was zero. With these recent successes, more taxes are undoubtedly in the works. Massachusetts is rumored to be considering the first statewide soda tax and Seattle tax architect Tim Burgess said in an interview that he’s been speaking with people from Maryland, California and Washington State interested in adopting a soda tax. Based on the lessons learned from the eight existing taxes, municipalities and states should structure their sugary beverage taxes to show the public that their tax dollars will be spent on projects and initiatives to help curb obesity and improve public health, rather than plugging budget gaps. By combining the disincentive of a tax with health interventions funded by the tax revenue, soda tax proponents have a good chance of gaining even more ground.