A study shows that lower-income households are the main beneficiaries of the revenue from sweetened beverage taxes, which help fund everything from food subsidies to early childhood education.
Despite fierce and deeply funded opposition to the tune of Eight cities from Philadelphia and Boulder to Seattle and San Francisco have successfully collected more than $30 million from the beverage industry in taxes on sugar-sweetened beverages.
Soda and other sugar-sweetened drinks are those leading source of added sugar in the US diet and has been linked to diabetes, obesity, cardiovascular disease and early death. With taxes averaging one to two cents per ounce, collected by retailers and passed on to consumers 70% of the time, these taxes have so far been successful in raising prices and ultimately reducing demand for sugary beverages without creating jobs in the United States lost to industry.
While researchers wait to see whether or not these taxes will have an impact on these critical public health outcomes, soda taxes are already having an impact in another area: the equitable programmatic use of the revenues they generate.
Last month, researchers from the University of Washington and the University of Pennsylvania published a Study on the economic benefits of taxes on sweetened beverages. Ultimately, the study found that taxes on sweetened beverages in all three cities surveyed, Philadelphia, Seattle and San Francisco, resulted in funds being remitted to lower-income demographics.
“When we started this study, there was already a lot of research examining the impact of taxes on sugary drinks,” said University of Washington epidemiologist Jim Krieger, one of the study authors and previously co-chair of the Seattle Advisory Board Tax community for sweetened beverages. Like tobacco taxes, increasing the price of unhealthy products will lead to a decrease in consumption and hopefully better health outcomes.
“As the [sweetened beverage taxes] started and became more prominent, the other side of the equation became more and more interesting,” notes Krieger. “Taxes increase revenue. When properly invested, they can provide a path to advancing public health and community health goals.”
But that all depends on what the revenue from those taxes is spent on. So Krieger and his colleagues set out to find out whether or not these taxes are fair.
First they looked at the expenses. Because taxes on sweetened beverages are flat taxes like sales taxes — everyone pays the same amount regardless of income, property ownership, or other variable — the first question was whether these taxes place an unfair burden on low-income people.
In each of the three cities the researchers studied, the researchers found that “there was no difference in the dollar amount that high-income households spent in a year versus low-income households,” Krieger says. While the group found that low-income households spend a higher percentage of their income on beverage taxes, the actual amount of money spent per capita was the same across all income brackets.
More importantly, the researchers found that while low-income households pay a higher percentage of their income for these taxes, they are also the primary recipients of the revenue that taxes on sugary drinks generate. This means that while people from different income brackets spend the same amount of money on these taxes, low-income households benefit the most.
“We looked at each city’s revenue allocations line by line to see what types of programs were investing or funding in and who was benefiting,” explains Krieger. They examined whether or not a given program was limited to people with lower incomes and whether or not a program was predominantly implemented in low-income areas. “When we looked at it, there was essentially a transfer of taxpayer money from higher-income households to lower-income households in all three cities. In every city, low-income households received more benefits back than they paid in taxes,” he adds.
In Seattle, for example, low-income households spent about $6 million annually on sweetened beverage taxes, but received $12.5 million in benefits through tax-funded programs. On the other hand, higher-income households paid about $16 million in taxes while receiving only $3.1 million in benefits — “much less than lower-income people,” Krieger notes.
“The bottom line is that … because of the way the revenue is allocated, it brings financial benefits to low-income households. According to this definition, it is a progressive tax policy because it shifts resources from higher-income households to lower-income households.”
It’s that pledge that has helped the current Philadelphia mayoral government successfully pass a sugary drink tax after two previous failed attempts. Jim Engler, chief of staff to Philadelphia Mayor Jim Kenney, explains that policymakers linked the tax’s message not only to health benefits, but also to the financial benefits it would bring to early childhood education in the form of community schools and preschools .
Philadelphia’s first cohort of nine community schools started in July 2016, while the city’s 2,000-seat Pre-K program started in January 2017, the same month the city’s liquor tax went into effect. Today, the city has 4,300 Pre-K places and 20 community schools, thanks in part to the city’s liquor tax.
“We are opening three new community schools this year in zip code areas with high rates of gun violence, out-of-home childcare, and low enrollment,” says Engler. “We’re also targeting low-income ZIP codes for our Pre-K program — 85% of the kids in our program are non-white and 71% live 300% below the poverty line.”
Of course, the key to ensuring such programmatic benefits is the earmarking of tax revenue, or the earmarking of tax revenue for specific programs. Christina Wong, public policy and advocacy director of a food justice organization in Washington, Northwest Harvest, explains that community feedback and ensuring the group has a clear mission and values to work from was key. to arrive at the justice Seattle’s liquor tax enjoys today.
“We have been working to quickly create a survey to conduct a temperature check of the organizations involved in the [committee] so we can reach out and get some input [from them]says Wong, who also co-chaired Seattle’s Soda Tax Advisory Board with Krieger before moving to a regular seat. On the values front, “a key value was the balance of expertise [of research] with … what the community says” for example through listening sessions.
One of the funding outcomes was support Seattle’s Fresh Bucks program, which helps low-income people buy more fruits and vegetables at grocery stores and farmers’ markets. More than 12,000 Seattle households participating in the program will receive $40 or more to spend on fruits and vegetables; Most of these low-income households are black or undocumented immigrants.
The researchers hope other cities interested in introducing taxes on sweetened beverages will take a look at what these three cities have done to ensure that tax revenues are reinvested in communities affected by the disproportionate health effects of these sugary beverages are faced.
Cinnamon Janzer is a freelance journalist based in Minneapolis. Her work has appeared in National Geographic, US News & World Report, Rewire.news, and others. She holds an MA in Social Design with a specialization in Intervention Design from the Maryland Institute College of Art and a BA in Cultural Anthropology and Fine Arts from the University of Minnesota, Twin Cities.