What Is the Soda Tax and Which Cities Have One?

Six cities collect soda tax but the list is growing

USA, California, San Francisco, Golden Gate bridge
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Depending on what part of the country you hail from, you might call it pop, soda, or a soft drink. If you live in one of a handful of American cities, you’ll pay more for the luxury of enjoying one. Several U.S. locations have jumped on the “soda tax” bandwagon and more intend to do so in the near future. So what is this tax and why would anyone want to impose it on a simple pleasure like soda?

The “Soda Tax”

First, the tax doesn't apply just to soda, at least not in all cities that collect it. Reaching for that juice drink instead may not spare you from paying the tax. This is technically a “sweetened drink” tax in many areas, and they have varying rules as to what exactly constitutes a sweetened drink. 

Does it have to contain sugar? Not necessarily. Some cities—although not all— include drinks made with artificial sweeteners. And while that juice drink might seem nothing like a soft drink, it’s still taxable in some cities if it contains less than 50 percent real fruit or vegetables. Sports drinks can get nailed with the tax, too.

Baby formula is generally exempt, and don’t worry if you ask for sugar in your coffee-to-go. But a Starbucks’ Frappuccino will most likely get you because it’s actually created with sugar. And what about alcohol? Some cities spare this, too, because it’s already taxed.

The tax ranges from 1 to 2 cents per ounce. This may not sound like much, but it can increase the price of a “sugary” drink by more than 75 percent. The price of a 12-pack of Coca-Cola can cost as much as $2 more. Although you’re not actually responsible for paying the tax in most cities, it will probably hit you in the wallet all the same. It's typically collected it from distributors, who then pass the cost on to retailers who in turn hike the prices paid by consumers. There are other such taxes called sin tax

Which Cities Collect This Tax? 

So where do you have to worry about the sugar content of what you’re drinking? As of 2017, six cities collected this tax as of 2017: 

  • Berkeley, California: Since March 1, 2015
  • Albany, California: Since April 1, 2017
  • Oakland, California: Since July 1, 2017
  • Chicago, Illinois: The tax actually extends to all of Cook County
  • Philadelphia, Pennsylvania: Since January 1, 2017
  • Boulder, Colorado: Since July 1, 2017

Boulder has the highest tax at 2 cents per ounce, followed by Philadelphia at 1.5 cents. The others levy 1 cent. 

Two other cities are slated to implement the tax at year’s end. It will go into effect on January 1, 2018, in San Francisco and Seattle. San Francisco will collect only 1 cent, but Seattle wants 1.75 cents. 

The District of Columbia and New York City are said to be contemplating a soda tax, as are various cities in Texas, New York, Hawaii, Massachusetts, and Arkansas.

Why Tax This American Favorite?

The question remains: Why? Why tax such a seemingly innocuous beverage? 

The answer behind most taxes is almost always revenue, but cities that impose the soda tax claim to have our wellbeing in mind, too. At least one organization, Bloomberg Philanthropies, says that the tax should "reduce consumer demand for unhealthy foods and beverages, improve the food environment, and make healthier choices easier for everyone.” Others have said that the tax “incentivizes” families to get healthier.

Drinks that include sugar contribute to heart disease, liver disease, and Type 2 diabetes, not to mention obesity and tooth decay. Proponents of the tax say that liquid sugar packs more of an unhealthy punch than sugars found in food, and drinking 20 ounces of a soft drink is the equivalent of swallowing 22 packets of sugar.

Where Does the Money Go?

Of course, the resulting revenues are an important part of the equation as well. Philadelphia officials claim that the soda tax will fund more than 2,000 preschool classrooms for low-income families and that it brought an additional $12.3 million into the city’s coffers during the first two months it was in effect. The city's goal is to achieve $91 million by the close of 2017.

Berkeley has assigned a panel of nutritionists, educators and health care workers to decide where soda tax revenues will do the most good. Schools there have already been funded for gardening and healthy cooking classes. The city says has raised more than $2.5 million from the tax, considerably less than Philadelphia’s lofty numbers, but the tax is half a cent more per ounce in Philadelphia and the city is far larger. 

The Cook County tax is also only 1 cent, but it covers the populous areas of Chicago and its suburbs. It raised $40 million in the first six months after it went into effect with a goal of $65 million by the end of 2017. But this Illinois location is laboring under a $174.3 budget deficit and officials have said they intend to use the money to plug that hole rather than put the money to health care or other family issues.

The Soda Tax Uprising

This being America, the opposition has not accepted the soda tax quietly in areas where it’s being imposed. Many affected consumers understandably take the position that the tax is Orwellian. They don’t want the government trying to control something as personal to them as their diets. Distributors argue that they’re being unfairly targeted.

In Philadelphia, the beverage industry filed a lawsuit against the city in 2017, hoping to derail the tax. Store owners and distributors claim that sales of soft drinks and related beverages have dropped anywhere from 15 to 45 percent since the soda tax was implemented and that this has prompted employee layoffs.

The tax is under attack in Cook County as well. As of September 17, 2017, a vote is pending with the Cook County Board as to whether it should be repealed. The Illinois Manufacturers’ Association has formed a political action committee to support repeal. 

As for consumers in these cities, they’ve proved to be a wily bunch. Sure, Berkeley boasts that the consumption of soft drinks dropped by 21 percent after the soda tax was implemented, but does this really mean that residents are drinking less pop? Both Philadelphia and Cook County residents are reportedly crossing city and county lines to buy their sodas elsewhere. They report that they’re not drinking less soda. They’re just not buying it locally, and they’re willing to drive upward of 10 miles to purchase it elsewhere. Local businesses claim that’s been quite a financial blow because, of course, consumers aren’t going all that way just to buy soda. They purchase other groceries while they're there, and many are gassing up their vehicles away from home as well.

Is the Tax Unfair to Some Residents? 

What about those who can’t afford to travel to another city or town to shop? Although Berkeley claims that the consumption of water there has increased 63 percent in accordance with the 21 percent decline in soda consumption, the American Journal of Public Health indicates that this data is taken only from low-income neighborhoods. Is the tax an unfair burden to put upon those who can’t afford to thumb their collective noses at the government and work their way around the tax? Opponents argue that this has been the case.

Stay Tuned

This is a decidedly new form of taxation, so stay alert for changes in your neck of the woods even if you don't live in a location that's currently collecting the tax. The oldest soda tax — the one in Berkeley — has only been around for about two and a half years as of September 2017. More cities might jump on the bandwagon at any time, and the resistance in Cook County and Philadelphia might prevail. The tax isn’t a sure thing yet in San Francisco, either, where opponents are raising the argument that mom-and-pop grocery stores are going to take an unfair hit because they’ll have to pay employees extra to deal with new accounting and inventory issues caused by the tax.

Will the soda tax thrive and spread across the country or will it be systematically abolished? Only time will tell.