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U.S. city hails fiscal buzz from controversial soda tax

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Latest MoneyWatch headlines 01:08

PHILADELPHIA - Philadelphia Mayor Jim Kenney says the city’s sweetened-beverage tax raised $5.7 million in January, more than double what city officials had projected.

Kenney’s announcement Thursday comes a day after some supermarkets and beverage distributors said they’re gearing up for layoffs after seeing beverage sales fall by 30 percent to 50 percent.

Philly soda tax 02:08

Kenney’s announcement says the city projected the tax, which took effect last month, would generate about $2.3 million in January. 

Philadelphia officials pushed through the 1.5 cent-per-ounce tax on sweetened and diet beverages to pay for nearly 2,000 pre-kindergarten slots and other programs. The tax amounts to $1.44 on a six-pack of 16-ounce bottles.

The city has projected the tax will raise about $91 million this year and that its revenue collections would pick up steam as the year progressed.

Kenney has dismissed industry warnings that the soda tax could spur layoffs, telling The Philadelphia Inquirer that he doesn’t think it’s possible for the industry “to be any greedier.”

City officials expect soda sales to rebound once customers get used to the higher prices, and they say talk of layoffs is fear-mongering meant to keep other cities from imposing a similar tax.

Those include packaged breads, cookies, soda ... 03:03

Other U.S. cities also are moving to tax sugary drinks, including San Francisco, Oakland and Albany, California; Seattle; and Boulder, Colorado. Berkeley, California, in 2015 became the first city in the U.S. to tax soda, tacking on 20 cents to the cost of a 20-ounce drink.

Public health advocates have lauded such initiatives, saying they help reduce soda consumption at a time that the incidence of obesity and diabetes is rising across the U.S.

The beverage industry has lobbied against the taxes, arguing that that they raise prices for consumers and that such policy unfairly singles out beverage makers for health problems. 

Soda consumption has been falling for years in the U.S. Bottled water last year was forecast to top soda sales for the first time.

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