Wednesday, July 15, 2020
July 15, 2020

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Westneat: Sugar tax is Seattle’s fastest-growing revenue source

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Something sure seems off with Seattle’s experiment with the soda tax. A telltale sign is that they’re in a “nasty spat” down at City Hall about all the extra money it’s spinning off.

What the mayor and City Council suddenly are warring over is what to do with the windfall created by the 18-month-old soda tax’s surging revenues.

But the real issue is, or ought to be, the booming soda-tax revenues themselves.

The main point of even having a sugary beverages tax is to blunt consumption of sugary beverages. Seattle’s tax, imposed in 2018, roughly doubles the price for a 12-pack of soda, so the city estimated consumption could logically plunge up to 40 percent.

That doesn’t appear to be happening.

In its defense, the city didn’t really know how much soda was drunk in Seattle, and so its initial estimates for how much money the new tax would raise were more of a guess. In the first year, the program brought in 49 percent more money than expected ($22.4 million versus $15 million estimated).

“Until we started to tax soda, sweetened beverages, we had no idea what level of consumption occurred in the city,” city budget director Ben Noble told the council recently. “We know the level of consumption now … With a year’s worth of experience, we think we’ve got this just about right.”

OK. But here’s the thing — now that they know what’s going on, it looks like soda consumption is going only up. The city budget office said revenues will be 8 percent higher this year than last (to about $24 million) and will continue to go up, though at a slower rate, in 2020.

This is a major problem for the tax, especially if it continues. It’s a fixed 1.75-cent charge per ounce of sugary fluid. So more revenue coming in equals more ounces of soda being sold in Seattle. If the ounces sold is advancing at 8 percent this year, which is faster than Seattle’s population and job growth, it’s hard to imagine how consumption of soda could be declining at all, let alone by double digits.

In fact the budget office showed that for this year, the soda tax is the city’s fastest-growing revenue source — faster growing than property, sales or real-estate taxes and faster than parking-meter or utility fees.

Figures paint different picture

Now, it’s possible that soda consumption plunged right when the tax first debuted, in January, 2018. It also could be declining among some groups — hopefully, among kids — while still going up overall. A team of public health researchers from the University of Washington is looking at some of these questions and should have a report later this year.

But even in cities where researchers have contended the taxes prompted large drops in soda drinking, the revenue figures stubbornly paint a different picture. Philadelphia’s beverage tax, also a per-ounce charge, is bringing in slightly more money this year than it did last — in a city where the population is stagnant.

In Berkeley, Calif., researchers recently contended that consumption dropped 52 percent because of a soda tax. That headline number was heralded as proving that soda taxes work. But unfortunately, the overall revenue from the tax in Berkeley, after first dropping by about 10 percent, has crept back up and is trending essentially flat. Because it’s a per-ounce tax like ours, it means soda drinking isn’t really down by half.

When this tax passed I felt it was worth trying, because it’s true that too much sugar is a bane of public health. But by definition and by its main purpose, this tax should erode over time. If the revenues don’t start dropping, at least relative to population growth, then it just isn’t working. If it keeps going up, then it’s a harmful policy fail.

That seems like something worth fighting about. Instead at City Hall they’re squabbling only over what to do with the spoils.

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