Philadelphia is first big US city to pass soda tax

Big blow to soft drinks industry, but move will generate millions for municipal projects

NEW YORK • Philadelphia has become the first major city in the United States to pass a tax on soft drinks, dealing a significant blow to an industry increasingly facing a consumer backlash over health concerns. 

In a 13-4 vote met with cheers and applause, the City Council approved a plan to add a tax of 1.5 US cents (two Singapore cents) per ounce - or about 50 US cents per litre - on soft drinks containing added sugar or artificial sweeteners.

Since 2009, there have been about 40 attempts to enact a soda tax in cities across the US, including two such tries in Philadelphia.

Only the measure in Berkeley, California, passed.

What makes Philadelphia's proposal different this time is that Mayor Jim Kenney focused on the potential fiscal benefits of a tax rather than public health.

That change in strategy could prove to be a watershed moment for the soda-tax movement. 

"It's a perfectly valid thing to do, and it has additional social benefits on top of the revenue benefits," said Mr John Donaldson, director of fixed income at Haverford Trust in Pennsylvania. The firm manages about US$1.3 billion, including Philadelphia bonds.

When implemented in January, the tax on sugary and diet drinks is expected to generate US$409.5 million over five years, according to Mr Kenney.

Of that amount, US$314 million would go to programmes such as expanding pre-kindergarten centres and renovating recreation centres and libraries.

Soda taxes are another sign of the consumer backlash hitting companies like Coca-Cola, PepsiCo and Dr Pepper Snapple Group.

Per capita consumption of carbonated soft drinks fell to a 30-year low last year, according to data compiled by Beverage Digest, a trade publication.

Tax proposals are active in San Francisco and four other cities, and in the states of Alabama and Illinois, according to Healthy Food America, an organisation that supports soda-tax campaigns across the US.

 The tax debate has passionate backers on both sides.

Advocates say it is a viable way to fund important programmes while also addressing obesity concerns.

Opponents say the levy disproportionately affects the poor, unfairly singles out the beverage industry and provides only a diminishing source of income for city programmes.

Philadelphia's plan is precedent-setting because it creates an important new source of tax revenue for municipalities, said Dr Jim Krieger, executive director of Healthy Food America. 

"It also is taxing a product that we know is unhealthy and therefore is sending a strong message to folks that consuming less sugary drinks is going to be good for them," he said.

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A version of this article appeared in the print edition of The Straits Times on June 18, 2016, with the headline 'Philadelphia is first big US city to pass soda tax'. Print Edition | Subscribe