A Sweet and Sugary Debate

Philadelphia became the first major city to take a stance against “sugar-sweetened and diet beverages” with a 1.5 cents per ounce tax on distributors. The tax was passed by the city council in June and has been in full swing since January. Some news sources are quick to point out the success of the tax as it has “generated $5.9 million in January, more than double its prediction of $2.3 million.” An important platform of the tax campaign was that the revenue from the tax would help fund schools, community programs and facilities in Philadelphia. But the primary purpose for the tax is to curb obesity. Since the tax has only been implemented for three months, it may be too early to see the success of the tax on this front.

But it is always fun to give predictions and both sides of this debate are giving their own views on the subject. One side makes the case that people who consume large amounts of these drinks (which the tax is focused on) are addicted to the sugar in these drinks. To these individuals, sugary drinks are less likely to change their consumption after a price increase behavior because of this. Opposition has also argued that a soda tax mostly targets poor communities as the poor spend a larger portion of their income on goods that are sin taxed, such as cigarettes and soda.

The other side of the debate points toward two different real life examples of successful soda taxes. Berkeley and Mexico are two places where the soda taxes have cut down consumption of high sugar content beverages. In 2014, Berkeley issued a soda tax that led to a 21 percent decrease in the consumption of sugary drinks. Mexico did the same thing in 2014 as well, but on a nationwide scale. This tax saw a 17 percent fall in sugary beverages among poor communities. Some discrepancies are debated by the opposition about the true success of these examples. But there is base level data which supports the argument that an increase in price of these sugary goods will curb consumption.

The debate of soda taxes can be boiled down to age of old debate of sin taxes and the behavior of consumers when the prices of a good are artificially altered. Answers can be found by looking at the price elasticity of these goods and all the factors that determine elasticity: availability of substitutes, necessity of the good, income level of consumers. But these effects can be argued in favor of both sides and as the debate continues across the continent, I think we could contribute to it as well. Share your sweet and sugary thoughts below!

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