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Drink taxes damage the economy and do nothing to cut sugar intake

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The start of the new year means new resolutions for millions of Americans. These include resolutions to lose weight, eat better, exercise more, and save money. In Philadelphia, local leaders set their own goals last January to curb obesity and raise revenue through a new tax on non-alcoholic beverages. But like so many New Year’s resolutions, the Philadelphia beverage tax fell short of the promises local officials made to consumers.

According to a new study by Oxford Economics, the Philadelphia beverage tax pushed consumers to shop outside of the city and beyond the reach of the tax, hurting job creation and the local economy inside the city limits. This study, conducted in partnership with the American Beverage Association, reviewed proprietary data from Philadelphia bottlers and same-store supermarket retailers to determine the real impact of the beverage tax for local consumers.

{mosads}Instead of motivating consumers to curb their sugar intake, the study found the tax encouraged Philadelphians to drive outside the city limits to buy beverages and groceries. Sales of bottlers declined 29 percent within Philadelphia city limits, but sales increased immediately outside city borders by 26 percent. Grocery and supermarket sales followed suit, indicating consumers simply took their shopping elsewhere to avoid the tax.

Even among those who stayed within city limits to do their grocery shopping, the purchase of items like frozen vegetables, yogurt, bread, and natural cheese all declined in the stores that were observed. This suggests another unintended consequence of the tax, as consumers shifted their purchasing habits away from other food options.

Oxford Economics also saw an uptick in the purchase of sugary powder drink mixes, which are not subject to the Philadelphia beverage tax. The sales of sugary drink powders increased by 29 percent within city limits after the tax was implemented, but by only 2 percent outside the city. This substitution may have saved some hard-earned money of consumers, but it didn’t cut the sugar in their diets.

In addition to failing to improve public health, the Philadelphia beverage tax also hurt the local economy. Oxford Economics found the Philadelphia beverage tax reduced local manufacturing activity, retail and wholesale margins, and trade margins. This resulted in an employment decline of almost 1,200 workers, with $80 million in lost gross domestic product and a $4.5 million loss in local tax revenue.

For those who view Philadelphia as a case study on beverage taxes, these findings are alarming, but they’re not isolated to the city. Studies in other localities have shown similar effects. Local officials in Cook County, Illinois, repealed their beverage tax due, in part, to its high unpopularity. In Seattle, signs were recently spotted in Costco suggesting consumers shop outside the city limits to avoid the new beverage tax. And following the implementation of a similar measure in Berkeley, California, the community actually saw an increase in non-alcoholic beverage calorie consumption.

If we want to help Americans cut sugar and fight obesity, taxing beverages won’t do the trick. We need a balanced approach and a better way forward. That’s why America’s beverage companies, some of the most iconic brands and fiercest competitors in the world, are working together with local governments and public health organizations to find real solutions that empower consumers to make informed decisions and won’t hurt local job creators and families.

You’ve likely seen smaller cans and bolder calorie labeling, as well as the expanded choices for no-calorie and low-calorie beverages at the supermarket and fountain machines. Americans want more options, which is why competitors like the Coca Cola Company, PepsiCo, and Dr. Pepper Snapple Group are voluntarily working to help consumers cut sugar and reduce caloric intake from beverages. As a result today, 48 percent of all non-alcoholic beverages purchased have no sugar, and 60 percent of new brands and flavors hitting the market have low or no calories.

There’s much more work to be done, and encouraging people to choose beverages with less sugar won’t happen overnight. Armed with more information, Americans are best equipped to make the beverage choices that are right for their families. That’s why we believe innovative product and marketing efforts, combined with education and better choices, are more effective at reducing sugar consumption over the long term. By offering more beverage options, and increasing people’s awareness of those options, we hope to help more families achieve their balanced health resolutions in 2018 and beyond.

Susan Neely is president of the American Beverage Association.

Tags Americans Business drinks economy Finance Health taxes

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