Politics & Policy

The Troubling Soda-Tax Trend

Stocking shelves in Alexandria, Va., in 2012. (Reuters photo: Kevin Lamarque)
Seattle joins the list of cities trying to control people’s behavior through sin taxes — and killing jobs in the process.

Taxes are rising, and freedom is being depleted as another American city tries to control what its residents put in their bodies.

On Monday, June 5, the Seattle City Council approved a 1.75-cent-per-ounce tax on soda. This equates to $1.18 added to the cost of a two-liter bottle and $2.52 added for a twelve-pack. 

Before the vote, small-business owners flocked into the council meeting to caution them on the consequences of an increase. It is “a business killer,” one business owner put it. “I think after this tax, my store is going to be closed,” said another, adding that his expenses had already doubled in the past nine years because of taxes and a minimum-wage increase to $15 per hour.

The council, however, justified the tax by explaining the health effects of drinking soda. Councilman Tim Burgess explained that children who drink soda daily are more likely to have future health problems, such as diabetes and obesity. This, he argued, justifies a tax that will decrease soda consumption.

Not everyone agrees.

These taxes are being used as a “behavior modification hammer,” Jami Lund told me.

Lund, a senior policy analyst for the Freedom Foundation, a Washington-based free-market think tank, said that the city council is “intentionally suppressing economic activity.” They know this will lead to “fewer jobs” and “fewer sales,” but they are willing to justify this because they want to control behavior, he said.

If Seattle’s soda tax has the same effect that Philadelphia’s soda tax had, Lund will be proven correct. Philadelphia’s 1.5-cent-per-ounce soda tax went into effect earlier this year and has already “depressed sales, increased prices, and destroyed jobs,” Bob Dick, a senior policy analyst at the Commonwealth Foundation, a Harrisburg-based free-market think tank, told me.

Since the tax increase, Coca-Cola eliminated about 40 positions in Philadelphia, while Pepsi laid off about 100 workers at its distribution centers in the city. ShopRite said it would have to lay off 300 Philadelphia workers, while one of the city’s largest distributors said it would have to eliminate 30 percent of its work force. They all blamed the tax increase for the job losses, which is causing a 30 to 50 percent drop in their sales.

Since the soda-tax increase in Philadelphia, Coca-Cola has eliminated about 40 positions there, Pepsi laid off about 100, ShopRite said it would have to lay off 300, and one of the city’s largest distributors said it would have to eliminate 30 percent of its work force.

Dick predicts that Seattle will “absolutely” see similar results, especially because the city implemented a higher tax than Philadelphia did. “Plus,” he added, “the tax comes at a time when small-business owners are dealing with the consequences of recent minimum-wage increases.”

Aside from the question of how “sin taxes” affect the economy, Dick argues that behavior-controlling taxes are a bad idea because “it’s not the responsibility of government to manage our dietary choices.”

Lund expressed similar concern, noting that this type of tax has become a trend. Along with Philadelphia and Seattle, Berkeley has passed a soda tax, at one cent per ounce. San Francisco, Boulder, Colo., and Cook County, Ill. (which includes Chicago), all have plans to implement similar soda taxes. New York also made headlines when the city tried to ban large sodas a few years ago.

The Founding Fathers would be “offended” by government officials using their power to tax for the purpose of “micromanaging” people’s lives, Lund said. Government officials believe that soda is bad, but they “don’t have the nerve to say that soda should be illegal,” he added.

I asked the Seattle’s mayor’s office for comment but did not receive a response by the time of publication.

Editor’s note: This article has been emended since it first appeared.

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