Why is Philadelphia stopping at a soda tax?

Edward G. Rendell, former governor and mayor who is chairman of the host committee, said the IRS noted "some technical problems" on their public charity application.
Edward G. Rendell, former governor and mayor who is chairman of the host committee, said the IRS noted "some technical problems" on their public charity application. (Getty Images)

A few countries have put a price on snacks and fats. The results are mixed.

Posted: March 28, 2016

A chorus has emerged among those skeptical of Mayor Kenney's plan to tax soda in Philadelphia: Why single out one industry?

"How about doughnuts? Things like that?" former Gov. Ed Rendell, the most recent to raise the point, said last week. "I'm a big consumer of Dunkin' Donuts, but why are they exempt?"

Is the idea so outrageous?

Not if you look around the world. While the United States has not embraced putting broad taxes on food and beverages, other governments have - and often in the name of health. They have imposed levies on snack foods, salt, and saturated fats as well as soda.

Hospitals in England charge more for junk food sold in vending machines and cafeterias. The United Kingdom is poised to impose a soda tax with two rates based on how much sugar is packed into a drink. And Japan pushed the envelope with its "fat tax," which fines employers and local governments if overweight employees or residents don't partake in dietary counseling.

That's not to say those cases are part of a trend. Examples are few, and one in Europe was a stunning failure, something that could discourage others from trying.

"It's an interesting thing in terms of what does it mean to have failed," said David E. Frisvold, an assistant professor of health economics at the University of Iowa who has studied the impact of soft-drink taxes. "In that case it's just that voters weren't happy with it."

The argument of taxing for health reasons fell flat here in 2010 when Mayor Michael Nutter pitched a soda tax as a way to combat obesity. Kenney has made little of the potential health benefits of his proposed 3-cents-per-ounce tax, focusing instead on what it would fund: universal prekindergarten, improvements to parks and recreation centers, and community schools.

Asked whether he would consider a broader tax, Kenney said taxing sugar was a lot more complicated than taxing soda.

"You can't go to every bakery," he said. "The scope of enforcement is so large that it's almost impossible to do."

Should the mayor change his mind, here are some options:

Hungary's 'chip tax'

Arguably the leader in the crusade to tax unhealthy foods is Hungary, where about 18 percent of citizens are obese. (That's higher than elsewhere in Europe but far below that of the United States, about 35 percent.)

In 2011, Hungary passed a series of taxes on soft drinks, energy drinks, and prepackaged sweet and salty snacks. Initially dubbed the "hamburger tax," because advocates hoped to target fast food, the levy was later named the "chip tax." The impact varies but often adds about 20 cents to the price of a snack.

"We have a public health crisis," Hungary's health minister, Miklos Szocska, told the New York Times in 2013. "We are leading the charts in many kinds of diseases. So, those who follow a certain lifestyle should pay for it in a small way."

Driving Danes out?

While Hungary has been the most aggressive, Denmark was first, imposing a tax on soft drinks in the 1930s.

But it also is home to the clearest food-tax failure. In 2012, Denmark announced it would repeal its soda tax as well as a tax on saturated fat it had levied a year earlier. It also canceled plans for a sugar tax.

One reason: Too many Danes were going to Germany or Sweden for their snacks and soft drinks. (That argument will sound familiar to those following the Philadelphia tax, which critics say will drive business to the burbs.)

Officials also said the fat tax - which was tacked onto many foods with saturated fats such as butter and meat, not just processed items - was an administrative nightmare for impacted businesses.

"The fat tax and the extension of the chocolate tax, the so-called sugar tax, has been criticized for increasing prices for consumers, increasing companies' administrative costs, and putting Danish jobs at risk," the Danish tax ministry said in a statement when it canned the levies.

Navajo Nation's Levy

Last March, the Navajo Nation became the first place in the United States to impose a tax on junk food. The levy adds 2 percent to the cost of foods with "minimal-to-no-nutritional value," including chips, soda, and fried foods that are sold within the reservation's 27,413 square miles, a territory that spans three states.

At the same time, the 5 percent sales tax was dropped for fresh fruits and vegetables.

The tax was implemented after years of political wrangling.

Advocates pointed to high rates of diabetes and obesity in the Navajo Nation. Critics countered that amid the reservation's rampant poverty and joblessness, the tax would hit the poorest residents hardest. They also said dropping the sales tax on fresh food was not enough because access to healthier options is limited, with fewer than a dozen full-service grocery stores on the reservation.

The revenue is pegged for wellness programs, including creating community gardens, farmer's markets, and bike trails.

Initial projections estimated $1 million per year. But the Navajo tax commission collected more than that in the first nine months and projects more than $2 million in revenue for 2016, according to Martin Ashley, the commission's executive director.

Because the tax is intended to lower consumption, that extra money is a bad sign.

"This tax is supposed to be discouraging people from purchasing unhealthy foods," he said. "I don't think it's discouraging anybody."

France's 'Nutella tax'

Nutella, a sweet, chocolate-hazelnut spread, is a staple in creperies and kitchens across France. So it's no surprise that the proposed tax on a key Nutella ingredient - palm oil - has been nicknamed for the popular treat.

The tax has been on the horizon in France for years and looks close to becoming a reality in 2017.

Advocates argue that harvesting palm oil, used in products ranging from cosmetics to margarine, is causing deforestation while consumption of the oil contributes to obesity.

Big producers of palm oil like Malaysia and Indonesia have pushed back, saying the proposed tax would cripple the industry. Responding to the pressure, French legislators agreed this month to soften the progressive tax, which originally would have capped at 900 euros (about $1,006) per ton in 2020. Instead, the tax would cap at 90 euros ($100) per ton.

The impact on a single jar of Nutella? That's still unclear.

But rest assured, the product won't change. The company that produces Nutella has vowed it won't doctor the recipe.

tnadolny@phillynews.com

215-854-2730

@TriciaNadolny

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