Philadelphia won the soda tax battle. But across the US, Big Soda is winning the war

PHILADELPHIA — When Philadelphia became the first big U.S. city to pass a soda tax in 2016, the rest of the country was watching. Mayor Jim Kenney basked in a national spotlight, appearing on CNN as even presidential candidates weighed in on the issue. And public health advocates predicted many others would follow in Philadelphia’s footsteps.

Now, as Kenney starts a second term following a 2019 reelection campaign that saw the beverage industry spend about $1.5 million fighting the tax, it seems likely to survive as his signature achievement. But Kenney is still one of relatively few mayors whose city taxes sweetened beverages.

Only seven cities levy a tax on soda distribution, and Philadelphia is the only one on the East Coast to do so, according to The Tax Policy Center, a Washington think tank. No new taxes have taken effect since January 2018. The beverage industry has mounted an effective counteroffensive in the past three years, backing state “preemption” legislation that now bans municipalities from passing new taxes in Arizona, California, Michigan and Washington state.

“After we passed ours … the soda industry has gone into kind of hyperdrive with some of these other jurisdictions,” Kenney said in an interview last week. “It’s a shame, because that money could be going to really good purposes in many communities.”

Philadelphia’s 1.5 cents-per-ounce tax has raised more than $200 million since it took effect in 2017. The revenue funds pre-K, community schools, and improvements to parks, recreation centers, and libraries, making it politically harder to repeal. But far outside the city, Philadelphia remains at the center of debates over soda taxes, as advocates point to it as an example to follow and opponents paint it as an abject failure.

Those debates will last for years to come, as researchers study the policy’s economic and public health impacts.

Soda taxes will likely “continue to be on a list of options that state and local policy makers are considering,” said Richard Auxier, a Tax Policy Center researcher.

The beverage industry’s political victories in recent years show it’s currently ahead in the war over taxing soda, said Marion Nestle, a professor emerita of nutrition food studies and public health at New York University. But she said increased attention to the issue still has a positive impact, because soda consumption is declining.

“People are buying fewer sugar sweetened beverages,” Nestle said. “And the tougher the fights get, and the nastier they get, the more sales go down.”

Soda taxes are also in effect in Seattle, Boulder, Colo., and four cities in California: San Francisco, Oakland, Albany and Berkeley, which passed its tax before Philadelphia. In 2017, voters in Santa Fe, New Mexico, shot down a tax. The same year, Cook County, Ill., which includes Chicago, passed and then repealed one. Lawmakers in seven states had proposed statewide taxes on soda last year, according to the National Conference of State Legislatures. None have passed yet.

Some of the industry’s biggest wins have been the passage of preemption laws.

“Beverage taxes have had a harmful impact on local businesses, employees and working families, do not achieve public health goals, are tremendously unpopular, and result in major job and economic losses, particularly among those who can least afford it,” Anthony Campisi, a spokesperson for the Ax the Philly Bev Tax Coalition, said in a statement.

Studies about the tax show that beverage sales in Philadelphia stores dropped after it took effect, while sales at stores just outside the city increased. Each side has its own take on the research, much of which has been funded by either the industry or public health advocates like former New York Mayor Michael Bloomberg. While opponents of the tax say the data is proof it’s hurting businesses and failing, supporters say a drop is to be expected — and is good for public health.

Jim Engler, Kenney’s chief of staff, said he often hears from advocates, researchers, and lawmakers around the world who want to know about Philadelphia’s tax. He advises them to attach taxes to a specific program that residents care about, and to prepare for the deep-pocketed industry to fight back. In Philadelphia, the American Beverage Association spent almost $19 million fighting the tax from 2016 through last September.

“I don’t know that it’s necessarily fair to say that they’re winning the war,” Engler said. “They have just about limitless resources, and if you’re thinking about it as a war, the side that has the limitless resources is always going to be favored.”

On a trip to New Hampshire for Sen. Elizabeth Warren’s presidential campaign last week, one voter at a senior center asked Kenney about it. The mayor said it’s paying for important programs but that he’s still facing opposition: A bill pending in Harrisburg would preempt the city from taxing soda.

“But I think we’ll fight them off,” Kenney said. “It’s just having the courage of your convictions and doing what you have to do to get it done.”

Opponents have sought to use Philadelphia’s tax to stop others from gaining traction. The beverage and grocery industries appear to follow a similar playbook in each city.

Operatives form coalition groups funded largely by the American Beverage Association, but not named after it — giving it more of a grassroots feel. In Philadelphia, that group is Ax the Bev Tax. In Washington, D.C., where a proposed tax on soda is pending, the industry-funded group Alliance for an Affordable D.C. is using studies about and news stories from Philadelphia in its campaign.

“We’ve seen the detrimental effect that similar taxes have had across the country — just look at Philadelphia,” the Alliance for an Affordable D.C. says on its website, citing reports of job losses and a grocery store closure after the tax took effect. When a West Philadelphia ShopRite closed in 2019 its owner blamed the tax, while the Kenney administration said the tax was just a scapegoat for one failing supermarket.

In Cook County, Ill., bad news about Philadelphia’s tax was a key component of the successful repeal campaign. The Kenney administration disputes the industry’s portrayal. But Engler acknowledged its effectiveness.

“The industry’s reaction has put the fear of God in other governments from trying to do this,” he said.

At home, the tax seems poised to outlast Kenney’s time in office after he easily defeated two primary challengers last year who opposed it. A majority of current City Council members support it.

A Philadelphia Inquirer poll last April found that the programs it funds are more popular than the tax itself. While 62% of voters called the tax a failure and 55% said it should be repealed, 62% said they’d like to keep the pre-K program.

And the opposition hasn’t given up.

“We remain committed to working with City Council and Mayor Kenney to provide much-needed relief to families and businesses impacted by this tax,” said Campisi, of the Ax the Bev Tax Coalition.

City Councilmember Maria Quinones Sanchez, the only Democrat to vote against the tax, introduced a bill last year that would have amended or potentially eliminated it. The measure died, but she did gain support for a Council-commissioned study of the tax that is currently underway.

Quinones Sanchez said she hopes the tax can be modified to a lower rate and to include fewer beverages. Products such as juices, sports drinks, and almond milk are also currently taxed.

“It’s expensive to be poor,” she said, “and now, because of the beverage tax, it’s more expensive to be poor in Philadelphia.”

More debate could come as some Councilmembers jockey for position in the 2023 mayoral race to succeed Kenney. Quinones Sanchez is seen as a likely candidate.

Kenney isn’t giving up either. Asked for his advice to other government leaders considering going up against the powerful beverage industry, he said: “Have courage, because they can be defeated.”