Dive Brief:

• Within two months of Philadelphia's soda tax going into effect, residents were about 40% less likely to drink sugary beverages every day than people living elsewhere, according to a study published in the American Journal of Preventive Medicine.

• The study also found that while Philadelphia residents increased their consumption of untaxed bottled water by 58%, they didn't change how much they drank sweetened fruit beverages subject to the tax — including Sunny Delight or Snapple varieties with less than 50% juice. Researchers from Drexel University's Dornsife School of Public Health speculated it may be because these drinks are viewed as healthier than soda, even though they may contain just as much sugar.

• The research team surveyed 899 Philadelphia residents before and after the 1.5-cent-per-ounce tax went into effect in January 2017. They also surveyed people in three nearby cities without the tax. 

Dive Insight:

One of the major reasons municipalities enact soda taxes is to cut consumption of sugary beverages, which backers say can improve public health. And though the taxes are always controversial, they have generally had this effect — though retailers, manufacturers and distributors have also been impacted by the way that the taxes are crafted and collected.

Berkeley, California was one of the first U.S. cities to enact a tax on soda, which went into effect on March 1, 2015. A before-and-after analysis last year showed sales of soda and energy drinks dropped by almost 10% after the penny-per-ounce soda tax was collected, while sales of water and milk increased. Berkeley's tax is levied on distributors.

In Philadelphia, soda distributors and grocery retailers say the tax has hurt businesses as consumers shift to other beverages or buy sugary sodas outside the city limits where they aren't taxed. The American Beverage Association and the Pennsylvania Food Merchants Association are continuing to legally challenge the tax on double-taxation grounds and are waiting to make their arguments before the state's highest court.

The results of this study are unsurprising, but the way that Philadelphia's tax is enacted had led to questions about who is bearing the brunt of it. While consumers can change what they drink — and many have, considering a Cornell University study showed the majority of the tax is passed along to them — soda companies have laid off employees and retailers have complained of the shift in business. A state representative whose district includes the northwest side of Philadelphia has proposed legislation to invalidate the tax — and preempt any other jurisdictional taxes on food, beverage or containers in Pennsylvania. In a memo, he called Philadelphia's tax unfair and nonsensical.

Regardless of which aspect of the larger industry is hurting the most, the city of Philadelphia is also being disappointed by the tax. The first 12 months of collection totaled about $79 million — 15% short of projections. Philadelphia officials have trimmed the budget for programs the tax was supposed to fund, including public pre-K classes, community schools, and improvements to parks, libraries and recreation centers. The money may not end up going there at all; City Controller Rebecca Rhynhart reported about 74% of the funds collected have gone into Philadelphia's general fund, which covers general government expenses.

It's hard to tell whether results of the before-and-after studies, budget totals or the post-tax legal wrangling will influence other cities considering enacting soda taxes. Several other U.S. cities have enacted the taxes, including Seattle, San Francisco and Boulder, Colorado — all of which have collected them for less than a year. Harvard University and Tufts University researchers found that this kind of taxes are likely to spread to other urban areas.

While this study continues to affirm that soda taxes impact how much consumers buy, the true cost of the tax to other stakeholders is still up in the air. Other municipalities considering these kinds of taxes should look at Philadelphia's example — as well as that of Cook County, Illinois, which overturned its penny-per-ounce soda tax after only four months of collection.

The only model so far that appears to meet both public health and manufacturer aims is the U.K.'s nationwide soda tax, which taxes manufacturers based on how much sugar is in a beverage. Anticipating the tax, many manufacturers have reformulated their beverages to lower sugar content. While it's only been collected for a matter of days, the impact on all stakeholders is still unclear, but the head of the U.K. Treasury, Philip Hammond has already lowered the amount the tax is expected to raise.