In the News
Philly.com - May 4, 2016
Commentary: What we tax is as important as how much we tax
WHEN JIM KENNEY was elected mayor, we knew what we were getting: a man who wanted to protect and to grow the city and its children. That's what we got.
Many Philadelphians of goodwill are in an ethical quandary: Do we agree that a robust pre-K covering the vulnerable children of Philadelphia is a good idea? Also parks, libraries, rec centers and green jobs? Of course. There's a plan for that: It'll cost $95 million a year over four years. Who's going to pay for it? There's the rub.
The funding solution lies in an increased sales tax, an excise tax, really. It will fall upon sugar-enhanced beverages. It's called the "soda tax," but also will cover energy drinks, bottled cappuccino, and many other beverages.
There's no getting around the reality that a very few, very different sectors of Philadelphia's community will be affected: beverage companies, smaller retail outlets and people of modest means.
That's a pretty narrow base upon which to expect $95 million a year. As it stands, drinks that fall under the definition of "sweetened" will cost 3 cents per ounce over the retail price. That sounds pretty modest, but if a family drinks only a two-liter bottle of soda per week, that will cost $212 a year. That might be reasonable to some, but consider this:
The median annual property tax for a residential property in Philadelphia is $1,207 a year; that lowball-estimate soda tax equals 18 percent of that annual property tax.
Shall we drill down to more specifics? Let's try the 19133 ZIP code, which has the lowest median household income anywhere in the city. The soda-tax estimate would make up about 45 percent of the residential property tax (median $482).
In 19118, Chestnut Hill, the soda tax would drop to about 4 percent of the annual property tax.
You see the problem. So what solution is truly fair to distributors, retailers and citizens alike? The answer lies under our feet.
Since 2013, the city of Philadelphia started the process of Actual Value Initiative, or AVI. AVI managed to achieve what decades of inattention did not: property values that were close to reality. The Office of Property Assessment is moving forward by assessing land values correctly and targeting more accuracy. OPA costs from $10 million to $12 million a year.
So, let's fund these programs - and more - through self-generated property taxation while reducing city reliance on economically unhelpful and outdated taxes, such as the soda tax.
Right now, a charge on the taxable land values in Philadelphia could bring in the same amount of revenue as proposed, with a much more progressive outcome based upon ability to pay.
Results? The soda tax in the lowest income ZIP code 19133 would be transformed into a modest $12 a year extra charge on the land portion of the property tax. Chestnut Hill would go to about $450 a year.
Good tax policy not only means getting the revenue for the programs we want, but making sure that all share in their contributions to the community: residential and nonresidential, in the neighborhoods and in Center City.
Joshua Vincent is executive director and CEO of the Center for the Study of Economics in Philadelphia.
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