Philadelphia Mayor Calls for Tax on Soda

(March 4) -- Facing a mounting deficit that could reach $500 million to $700 million over the next five years, Philadelphia Mayor Michael Nutter is getting creative. Among budget cuts and various fundraising strategies, including charging a fee for trash collection, Nutter has proposed a tax on sweetened beverages such as soda, energy drinks and bottled teas.

It's an especially appealing tax target for Philadelphia, a city where half of the children are considered obese. According to the American Journal of Clinical Medicine, sweetened beverages account for 8 to 9 percent of the average American's caloric intake, and some hope that putting a tax on soft drinks could help curb the nation's rampant obesity problem.

In September, a group of doctors and researchers published a paper in the New England Journal of Medicine outlining their argument for taxing sweetened beverages. They argued that not only could taxing soda improve public health by reducing the nation's liquid calorie consumption, it would raise money for health care and lower costs associated with conditions such as diabetes.

The tax would charge 2 cents per ounce of soda -- amounting to $2.88 per 12-pack of 12-ounce cans -- including fountain drinks but not diet drinks.

Audrae Erickson, president of the Corn Refiners Association, which represents the makers of the ubiquitous beverage sweetener high-fructose corn syrup, believes the tax will be unproductive and ultimately damaging.

"Singling out certain foods or beverages for government penalization through tax policies will only serve to further confuse consumers, raise grocery prices at checkout, and will not lead to meaningful results in assisting Americans to adopt healthier lifestyles," she said.

Chicago is the only major city that taxes soda, but Nutter's new tax would be significantly higher. Seven other states are considering similar legislation, but a soda tax proposed in the House Ways and Means Committee was voted down.

The mayor has called the proposal the "Healthy Philadelphia Initiative," but the Philadelphia Inquirer says "it's clear the city's first priority is to raise money."

City officials estimate the tax could raise $77 million annually.

Some, however, argue that the tax will further damage Pennsylvania's already ailing economy, hitting Coke and Pepsi bottling plants in Philadelphia especially hard.

"At a time when Philadelphians are struggling through a tough economy with double-digit unemployment rates, this tax will threaten 2,000 well-paying beverage industry jobs in the Philadelphia area," American Beverage Association spokeswoman said Susan Neely in a statement. "And its impact will reach beyond the beverage aisle, hurting Philadelphia grocers by driving sales outside the city limits."

Others feel that a small price hike won't make much of a difference in who drinks soda. "If your goal is to reduce obesity, this won't work, because most people won't stop drinking soda," Richard Williams, managing director of the regulatory studies program and government accountability project at the Mercatus Center at George Mason University, told ABC News in September. "You can't change people's taste buds.

"I don't think it's necessarily true that the poor haven't heard that water's cheaper than soda," he continued.

Nutritionists argue that while a minor increase in the price of soda is not a magic bullet, it is an important step in reducing the nation's caloric intake.

"No one thing you or I could conjure up will solve the problem all by itself. That doesn't mean it wouldn't be helpful," Kelly Brownell, director of Yale University's Rudd Center for Food Policy and Obesity and lead author in the New England Journal of Medicine article, told the Philadelphia Inquirer. "I salute the mayor and the city and Health Department for taking the lead."