Despite the failure of similar laws in more than 30 U.S. cities and states in recent years, and in the face of massive opposition from the beverage industry, Philadelphia (PA) has instituted a 1.5 cent-per-ounce tax on sugary drinks and diet beverages. While other U.S. municipalities are considering similar levies – aimed, they say at reducing sugar consumption and obesity – only one locality, Berkeley CA, has such a law on the books. It was instituted in 2014.
Critics contend that such taxes disproportionately affect the poor, who tend to more prone that other segments of the population to consume sugary drinks.
The same argument is put forth in the U.K., where what amounts to double taxation is about to be applied to sugary drink sales. Double taxation because such beverages already are subject to a sales (VAT) tax, and the new levy will add a levy of as much as twelve pence (eight cents) to the cost of a can of Coke.
The British scheme is intended to force companies who produce drinks like Coca-Cola, Gatorade and tonic water to reduce the amount of sugar in their recipes. Critics of the Conservative government say it has, in reality, just introduced another punitive tax on the poor.
The lowest-earning British citizens, who smoke moderately, already lose 37 percent of their disposal income to “sin taxes,” according to the Institute for Economic Affairs. “Sin taxes are a pious, regressive absurdity,” says the Spectator, riding the wave of incredulity racing across Britain.
Of course, no one is forced to glug their way through super-sized family bottles of Coca-Cola, but studies suggest people on lower incomes are the most regular consumers. By targeting cigarettes—and now sodas—the government is doubling down on disproportionately taxing the poor.
“It is astonishing that the Chancellor has announced a tax on sugary drinks when there is no evidence from anywhere in the world that such taxes have the slightest effect on obesity,” said Mark Littlewood, director general of the Institute of Economic Affairs. “Whether dressed up as a direct tax or a levy on industry, the effect will be that the government will be picking the pockets of the poor for no benefit.”
It’s also something Prime Minister David Cameron promised he would not do—just five months ago. At the time, he did not cite regressive taxation as his primary fear, nor concerns about the nanny state gone wild. He just said it wouldn’t work: “The Prime Minister thinks there are more effective ways of tackling this issue than putting a tax on sugar,” a spokesman said in October.
Well, he’s changed his mind.
His finance minister—Chancellor of the Exchequer George Osborne—announced that drinks companies would be taxed according to how much sugar is in each drink. One rate for drinks with more than 17.7g per 12-oz can, and a higher rate for those with at least 28g. Coke falls into the top bracket, and would cost around 8 pence (12 cents) more. High-end smoothies and energy drinks will also be subject to the tax, although there are exceptions for milk-based drinks and pure juices.
“I am not prepared to look back at my time here in this Parliament . . . and say to my children’s generation, ‘I’m sorry. We knew there was a problem with sugary drinks. We knew it caused disease. But we ducked the difficult decisions and we did nothing,’” he said.
Soda companies have two years to change their drinks before the levy comes in. A sales tax (VAT) is already charged when customers buy soda, unlike most other food and drink in Britain.
Osborne says he hopes the new tax will force the companies to adapt, but analysts say the charge is likely to be passed straight on to consumers.
Health campaigners, and some former New York mayors, hope that will encourage people to shop differently.
Meanwhile, Philadelphia’s Democratic Mayor Jim Kenney does not contend his sweet-drinks tax is health oriented: He sold the City Council on the idea by putting forth a plan that would see most of the raised revenue – an estimate $365 million over five years – into schools, preschools and similar education-oriented projects.
After the Council’s vote, Mayor Kenney said, “Thanks to the tireless advocacy of educators, parents, rec[reation] center volunteers and so many others, Philadelphia made a historic investment in our educational system today.”
Not to mention what parents will save by not having to pay to repair sugar-damaged teeth, or for the care of diabetes contributed to by kids’ excess sugar consumption.