Not so sweet: Sugar tax spikes soda prices by 75%

One year ago, Philadelphia imposed a tax on sweetened drinks of 1.5 cents per ounce, expecting to fund all kinds of worthy causes such as community schools, recreation centers, libraries and parks.

The revenue projections fell short, however, as sales of carbonated soft drinks – the largest sweetened beverage category – dropped 55 percent inside the city while rising 38 percent just outside it.

Now, Seattle has enacted its own tax of 1.75 cents per ounce to all sweetened beverages sold in the city, and the sticker shock already is apparent, with flats of Gatorade at Costco rising by 65 percent and Dr Pepper by 75 percent, notes Jon Gabriel of the blog Ricochet.com.

To avoid complaints, Costco has posted an explanation of the price increase, showing how much of the total price is due to the Seattle tax.

Costco’s price for 36 12-ounce cans of Dr Pepper, for example, is $9.99. But the new Seattle tax adds $7.56 to the customer’s cost, making the total a whopping $17.55.

The Seattle City Council passed the tax last June by a 7-1 vote, anticipating $15 million in revenue in the first year.

Costco has posted notices informing customers that the product can be purchased at Costco locations just outside the Seattle city limits without the beverage tax.

Sold as a health initiative, the city determined that $2 million in revenue from the tax will expand a city program that gives fruit and vegetable vouchers to low-income families. Although, as Gabriel points out, only $400,000 will go to actual vouchers. The other $1.6 million will be used for “administrative costs.”

Jong Kim, the owner of a convenience store in Seattle, expressed his frustration to the Seattle Times.

“What can I do? I have no power,” he said. “Seattle is too expensive. Everything is a tax.”

Seattle also has led the way in imposing a massive minimum-wage hike, jumping from $11 an hour to $13 for large employers in January 2016. In June, however, research released by a team of economists at the University of Washington concluded the wage hike had led to steep declines in employment for low-wage workers and a drop in hours for those who kept their jobs.

The researchers concluded that the negative impact of lost jobs and hours more than offset the benefits of higher wages, with low-wage workers earning, on average, $125 per month less because of the higher wage.

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