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The Paradox of the Sugar Tax: How Buying a Soda Benefits Services for the Poor

Starting next year, soda drinkers will pay more for their sugar fix in Seattle — the latest city to impose a levy a tax on sweetened drinks as the debate surrounding the idea shifts to dollars and cents instead of ounces and pounds.

The Seattle city council recently voted by a 7-1 margin to levy a 1.75-cent per ounce tax on soda and other sugary beverages. Like Philadelphia and other cities that have voted recently on such taxes, Seattle’s proposal would use the money it raised to help underserved and disadvantaged populations. Mayor Ed Murray said in a February announcement the funds would go to a variety of initiatives aimed at improving educational access and nutrition for low-income residents.

Soda tax not the solution to universal Pre-K 3:46

When Philadelphia succeeded in passing its tax last year over strenuous objections from the soda industry — which is still fighting the tax in court — it did so by focusing on the financial, rather than the public health benefits.

“Philadelphia was the very first to focus on a non-health frame and that was groundbreaking because it provided another option for support,” said Kelly Brownell, professor and dean of the Sanford School of Public Policy at Duke University.

Related: Philadelphia Pushes the Benefits of a Soda Tax

Previous attempts to tax soft drinks had focused on public health ills like obesity and diabetes, with mixed results. “In some places, one frame might work better,” Brownell said. “That’s why it’s nice to have a second option.” Philadelphia’s pledge to use soda-tax money to implement universal pre-K garnered strong support in a city where more than one in four residents live below the poverty line, according to an April report from the Pew Charitable Trusts’ Philadelphia Research Initiative.

Last fall — after the tax had been voted on but before it took effect — a Pew poll found that 54 percent of Philadelphia residents supported the sugary-drink tax, compared to 42 percent who opposed it.

The American Beverage Association, an industry trade group, says the soda taxes aren't working.

"Taxes have never been shown to reduce obesity or improve public health," spokeswoman Lauren Kane wrote NBC News in an email.

Higher Price = Lower Sales

But using data about the consumer habits in Berkeley, California, which began taxing sugary beverages in 2015, scientists have been evaluating how people change their behavior when sweetened beverages become more expensive. A study published in April by the Public Library of Science found that, by and large, the tax was successful at curbing consumption. Sales dropped by about 10 percent, while sales of diet soda and energy drinks dropped by almost the same percentage. Sales of water and unsweetened tea, juice and vegetable drinks not affected by the tax rose around 20 percent. It found that chain stores tended to pass the cost of the tax straight onto the consumer, while mom-and-pop shops were less likely to do so, and the overall amount people spent on their shopping trips didn’t go up — a prospect opponents of the tax predicted might happen.

The caveat to these results is that Berkeley is smaller and richer — and residents tended to consume less soda even before the tax — than other cities that have voted to tax sugary drinks. Research studying the effect of a sugary-drink tax in Mexico, though, found that consumers there also responded by buying less soda, with low-income households cutting their consumption the most.

The real test will be what happens in Philadelphia, a much larger, more diverse and poorer city. “That’s where we really want to see the impact, because they’re very high consumers of sugary beverages,” said Barry Popkin, professor of nutrition at the University of North Carolina at Chapel Hill.

Poorer Americans Drink the Most Soda

While the popularity of soda, including diet soda, has been falling among the middle class and well-off for years, the same hasn’t happened at the bottom of the income spectrum. “Low-income Americans are the highest consumers today,” Popkin said.

A financial focus is also a bit of a double-edged sword in the court of public opinion and the media. Oakland’s East Bay Times reported last month that the city’s mayor dropped a plan to put soda tax money towards Oakland’s budget deficit rather than anti-childhood obesity programs, after residents objected.

Related: Diet Sodas May Raise Risk of Dementia

“One of the great ironies of the soda tax initiatives is that people have to buy sodas to raise revenues for whatever social purpose has been targeted,” Marion Nestle, a professor of nutrition at New York University, told NBC News.

This allows the beverage industry to characterize shortfalls as evidence that the taxes don’t work, even though this means people are buying less soda and the public health impact is positive. On the other hand, receipts that meet or exceed estimates are portrayed as bad for the labor market.

“The loss of jobs… that’s only true if the money somehow disappears from the community,” Brownell said. “Presumably, they’ll buy other things and the number of jobs would stay the same,” he said. The April PLoS report found that store revenue in Berkeley didn’t fall after the tax was implemented, and a Public Health Institute analysis of the Berkeley labor market found that employment in food-industry jobs has actually grown by 7.2 percent since the soda tax was implemented.

Cans of soda are displayed in a case at Kwik Stops Liquor in San Diego
Cans of soda are displayed in a case at Kwik Stops Liquor in San Diego, California. REUTERS/Sam Hodgson

Big Soda vs Public Health

Ultimately, some experts say the soda industry may have an uphill fight on its hands as awareness grows. Currently, a handful of other cities including Boulder, Colorado; San Francisco; and the Illinois county that encompasses Chicago have voted to tax sugary beverages.

“The geographical dispersion of places voting for the tax is really interesting,” Brownell said. “These places are pretty representative of the country at large. I think it’s a signal of a wave of these taxes.”

Changing demographics also play a role. Pew’s poll found that support for Philadelphia’s tax was most pronounced among adults under the age of 35, with nearly two-thirds in favor of it.

And Nestle said the more aggressively the soda industry attacks, the more its own public image could suffer. “The message is out there — drinking sugar water is not a great idea,” she said. “The harder the industry fights, the more people understand that this is Big Soda against public health.”