Lower-income households are the main beneficiaries of sugar-sweetened beverage tax revenue, helping to fund everything from grocery subsidies to early childhood education, a study shows.
Despite the fierce and deeply funded opposition to the tune of more than $30 million from the beverage industry, eight cities from Philadelphia and Boulder to Seattle and San Francisco successfully imposed taxes on sugar-sweetened beverages.
Soda and other sugar-sweetened beverages are leading source of added sugar in US diets and are associated with diabetes, obesity, cardiovascular disease and early death. Through taxes that average one to two cents per ounce, levied by distributors and passed on to consumers 70% of the time, these taxes have so far successfully raised prices and ultimately reduced demand for sugary drinks without losing jobs in the industry.
While researchers are still waiting 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: fair programmatic spending of the revenues they bring.
Last month, researchers from the University of Washington and the University of Pennsylvania published a study of the economic benefits of taxes on sweetened beverages. Ultimately, the study found that taxes on sugar-sweetened beverages shifted funds to lower-income populations in all three cities they studied: Philadelphia, Seattle, and San Francisco.
“When we set out to do this study, there was already quite a bit of research that had evaluated the effects of taxes on sugary drinks,” explains University of Washington epidemiologist Jim Krieger, one of the study’s authors and previously co-chair of the Seattle Community Sugar Tax Advisory Council. sweetened drinks. Like tobacco taxes, raising the price of unhealthy products leads to reduced consumption and, hopefully, better health outcomes.
“Like [sweetened beverage taxes] started and became more famous, the other side of the equation became more and more interesting,” notes Krieger. “Taxes raise revenue. If properly invested, they can provide a way to further achieve public health and community health goals.
But it all depends on what the revenue from these taxes is spent on. So Krieger and his colleagues set out to find out whether these taxes were fair or not.
First, they looked at the costs. Because taxes on sugar-sweetened beverages are flat taxes like sales taxes—everyone pays the same amount regardless of income, property, or other variables—the first question was whether these taxes placed an unfair burden on low-income people.
In each of the three cities the researchers looked at, the researchers found “there was no difference between the dollar amount spent by high-income households in a year versus low-income households,” says Krieger. Although the group found that low-income households spend a higher percentage of their income on beverage taxes, the actual amount of money spent is the same per capita across income levels.
More importantly, however, the researchers found that while low-income households pay a higher percentage of their income on these taxes, they are also the primary recipients of the revenue that sugary beverage taxes produce. This means that while people of different income levels spend the same amount of money on these taxes, low-income households benefit the most from them.
“We looked at the distribution of revenue in each city, line by line, to see what programs were invested in or funded and who benefited from them,” explains Krieger. They looked at whether or not a program was limited to lower-income people and whether a program worked primarily in low-income neighborhoods. “When we looked at this, in all three cities there was essentially a transfer of tax money from higher-income households to lower-income households. In every city, lower-income households got more back in benefits than they paid in taxes,” he adds.
In Seattle, for example, lower-income households spend about $6 million a year on sugar-sweetened beverage taxes, but receive $12.5 million in benefits through programs funded by the tax. Higher-income households, on the other hand, paid about $16 million in taxes while receiving just $3.1 million in benefits — “much less than low-income people,” Krieger notes.
“The bottom line is that … because of the way income is distributed, it provides financial benefits to low-income households. By this definition, they are progressive tax policies because they shift resources from higher-income households to lower-income households.
It was this promise that helped Philadelphia’s current mayoral administration successfully pass a sugary drink tax after two previous failed attempts. Jim Engler, chief of staff to Philadelphia Mayor Jim Kenney, explains that policymakers have tied the message of the tax not only to the health benefits, but also to the funding benefits that early childhood education will bring in the form of public schools and preschools.
The first group of nine Philadelphia public schools launched in July 2016, while the city’s pre-college program launched with 2,000 seats in January 2017, the same month the city’s beverage tax went into effect. Today, the city has 4,300 preschool places and 20 public schools, thanks in part to the city’s beverage tax.
“This year, we’re launching three new community schools from zip codes that have high rates of gun violence, out-of-home placements and low school attendance,” says Engler. “We also target low-income zip codes for our prep program—85 percent of the kids in our program are non-white, and 71 percent live 300 percent below the poverty line.”
Naturally, the key to providing such programmatic benefits is the earmarking of tax revenues, or earmarking of tax revenues for specific programs. Christina Wong, director of public policy and advocacy for the Washington food justice organization Northwest Harvest, explains that community feedback and ensuring the group had a clear mission and values to work from were of key to achieving the capital that Seattle’s beverage tax enjoys today.
“We worked to create a quick survey to do a temperature check on the organizations involved in the [committee] so that we can contact and receive information [from them]” says Wong, who also co-chaired the Seattle Soda Advisory Board with Krieger before moving to a full-time seat. On the values front, “a key value was balancing expertise [of research] with… what the community is saying” through listening sessions, for example.
One of the outcomes of funding is support Seattle’s Fresh Bucks program, which helps lower-income people buy more fruits and vegetables at grocery stores and farmers markets. More than 12,000 Seattle households enrolled in the program receive $40 or more to spend on fruits and vegetables; most of these low-income households are people of color or undocumented immigrants.
The researchers say they hope other cities interested in implementing sugar-sweetened beverage taxes will look at what these three cities have done to ensure that tax revenue is invested in communities that face disproportionate health impacts from these sweet drinks.
Cinnamon Janzer is a freelance journalist based in Minneapolis. Her work has appeared in National Geographic, US News & World Report, Rewire.news, and more. 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 Art from the University of Minnesota, Twin Cities.