THE SUGARY-DRINK tax proposed by Mayor Kenney, also known as the "soda tax," is controversial because it takes a greater share of the income from poor families than rich ones. And since we at the Pennsylvania Budget and Policy Center are fundamentally committed to economic justice, we are always inclined to be suspicious of taxes that do that.
So it may come as a surprise that we have concluded, overall, that the sugary-drink tax proposed by the mayor is a good idea. Though the costs fall more heavily on those with low incomes, for two reasons, more of the benefit of the tax will go to low-income Philadelphians, as well.
The first benefit of the tax flows from how the new revenue will be spent - on pre-K education, community schools, and parks and community recreation centers. Pre-K education helps ensure that kids from low- and moderate-income families have a better start in life. And recreation centers and parks not only provide benefits to individuals, young and old, but also are at the center of vibrant Philadelphia neighborhoods. While everyone in Philadelphia benefits from them, those facilities are especially important to those who don't have the means to access private alternatives.
If these were the only benefits of a sugary-drink tax, we might still have some qualms. There are other ways to fund pre-K education and Recreation Centers, and they ideally should be paid for by those who can most afford to do so.
But the second benefit of a sugary-drink tax - the contribution it will make to the health and economic well-being of all Philadelphians, and especially those with low incomes - depends on this specific tax.
The harms of the overconsumption of sugary beverages have long been known to public health specialists. Sugary-beverage consumption has increased dramatically over the last 50 years and is a major cause of the obesity epidemic. Obesity rates tend to be higher among those with low incomes, in part because because sugary beverages are less expensive, and higher-quality foods less available, in low-income neighborhoods.
Consumption of sugary beverages has been linked to a variety of health problems, especially heart disease and diabetes. These health issues are found everywhere in the United States, but are especially problematic in Philadelphia.
Our analysis of the extensive research suggests that a 3-cents-per-ounce tax will dramatically reduce the consumption of these beverages and improve both the health and finances of Philadelphians. That research supports the Kenney administration's claim that the proposed tax will reduce sugary beverage consumption by 55 percent. Consumption among low-income Philadelphians might well drop even more.
We have used these results to estimate the consequences of Kenney's proposal for the health of Philadelphians. We project that a 3-cents-per-ounce tax would prevent the premature death of 261 to 391 Philadelphians over 10 years and would keep roughly 3,500 to 5,600 people from suffering serious illness during the same period. Given that those with low incomes consume more sugary beverages, are more likely to be dissuaded from doing so by a tax, and already are more likely to be obese, it seems reasonable to assume that more of the health benefit will accrue to them.
The improvement in health that would result from a sugary-beverage tax has financial benefits for Philadelphians, as well. Over a 10-year period, we can expect that the proposed tax would save $230 million to $345 million in health care costs. Some of those savings would reduce the costs of health insurance or out-of-pocket costs for health care. Some part will flow to the city's treasury by reducing the costs in health centers. In addition, fewer people will lose wages because of illness. The reduction in both health-care costs and lost wages will flow more to low-income rather than high-income Philadelphians.
The costs of all these benefits will not be huge. This is one that Philadelphians can choose to avoid by changing what they consume. If the consumption of sugary beverages falls by half, the tax would cost the average person only $21 a year.
Thus, even though the proposed tax does fall more heavily on those with low incomes than high incomes, the benefits of the tax flow to the same group. Low- and moderate-income Philadelphians will reap greater benefits from the expansion of pre-K, from the improvement in community recreation centers and parks, and from both the health and financial benefits of a reduction in the consumption of sugar-sweetened beverages.