In the News
Philly.com - March 30, 2016
Commentary: Soda tax will hurt poor people and local businesses
PHILADELPHIA's low-income families and entrepreneurs are under attack.
The culprit doesn't mean any harm. Really, he is a fine guy. But that doesn't justify his actions or his failure to consider the consequences.
Mayor Kenney's proposed $400 million soda tax sounds clever at first glance: tax people for enjoying a beverage that admittedly isn't the healthiest and fix the city's broken budget. Unfortunately, not only is his tax highly unlikely to accomplish these goals, it also will harm our poorest neighbors and the entrepreneurs who support the local economy.
What politicians often forget is that taxpayers are unique individuals who respond to tax hikes in different and unexpected ways. While some people might change their drinking habits, as the mayor hopes, many will not. The effect will not necessarily be lots of healthier people or more revenue, but less money in the pockets of those who need it most and in the local businesses they patronize.
Raising $400 million in new taxes will hit pocketbooks hard. At 3 cents of higher taxes per ounce of sugary drink, a two-liter bottle would more than double in price from $1.50 to $3.52.
Low-income residents will bear the brunt of this, as they generally pay little or no income taxes, but do spend a disproportionate amount of their income on soda and other sugar-sweetened beverages. Furthermore, while middle- and high-income residents are able to drive outside the city to shop at larger discount stores, low-income residents, especially those without vehicles, often will not have that option.
Even if low-income residents begin to change their drinking habits, they will still bear the major burden of this tax.
Meanwhile, the more mobile residents of the city will opt to do more shopping outside of Philadelphia. The Kenney administration's finance director, Rob Dubow, has already acknowledged that the city expects demand to fall by more than half in just the first year, as consumers shop outside the city. Some stores might be able to handle the lost revenue, but smaller grocery stores, convenience stores and street vendors will be hit hard by the lost revenue. These businesses serve a real function in our city: hiring local residents, giving life to low-income communities, and of course, providing Kenney's all-important tax revenue.
If they go out of business, there will be people without jobs, communities without businesses, and tax coffers without tax dollars. This plan was really quite shortsighted.
If that's not bad enough, it's unlikely this tax will both decrease consumption of sugary beverages and raise tax revenue. After all, if people don't drink so much soda, what will happen to the tax revenue it was supposed to provide?
The city estimates a 55 percent decline in the sales of sugary beverages the first year and a 1 percent decline in sales in the following years. This is a highly optimistic scenario, given how high the tax is and how easily suburban residents will be able to avoid it. Lots of people will continue drinking the same amount of cola, but they won't buy it from our local businesses. The city won't have much more tax revenue, but our poorest residents will have a lot less money, and our local businesses will struggle.
Philadelphians might want to consume a little less soda, but that's up to each responsible adult to decide, not Kenney. His job is to write a responsible budget that provides for our city's core functions without unduly burdening the hardworking taxpayers he serves.
Kenney certainly doesn't intend to harm low-income Philadelphians or our local businesses, but that doesn't excuse him. There's no fizz in a regressive tax hike. We urge the City Council and Kenney to find better ways to fund the city's needs. It's time to pour Philadelphians a new drink - this proposal has gone flat.
Beth Anne Mumford is the Pennsylvania state director of Americans for Prosperity.
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