Opinion Soda Tax
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July 24, 2017

Opinion: No brotherly love in Philly’s soda tax

Hundreds of pro-tax protesters armed with earsplitting horns and loud chants created such a disturbance at a recent state Senate hearing on Philly’s soda tax that it had to be canceled. It was so loud that state Senator Scott Wagner couldn’t even announce that he was postponing the hearing. So much for a productive discussion.

The soda tax proponents claim that it will generate sustainable revenue and improve the community’s health by reducing the consumption of sugary drinks, but so far these promises haven’t panned out.

Last year, Philadelphia became one of the first cities to adopt a sugary drinks tax, which took effect at the beginning of 2017 (full list of products here). Mayor Kenney and other politicians championed the one-and-a-half cents an ounce tax as a clever way to tackle the city’s multifaceted health and budget problems. Fewer people will purchase unhealthy drinks, but when some do the government will receive sustainable revenue to help the city, right?

Wrong.

The city government recently lowered revenue projections for this year after realizing the tax isn’t working out as planned.

For starters, the tax falls disproportionately on low-income residents, who are the biggest consumers of these beverages. Unlike middle and high-income residents who now buy their sugary drinks in the suburbs, low-income consumers without cars have no choice but to shop at local stores and pay higher prices.

This ill-conceived tax also hurts Philly’s mom-and-pop grocery stores—already struggling to compete against the larger chains—as shoppers take their money outside the city to buy soda and, while they’re at it, the rest of the groceries they used to buy closer to home.

Ken Klein, co-owner of Klein’s Supermarket in Fairmount, which has been around since the 1890s, says many of his customers will “get in their cars and go six miles up the hill and go to the stores there.” Klein and others argue the tax is a counterproductive “grocery tax” that jeopardizes inner-city businesses and benefits thriving suburban markets.

Several more store owners told the local ABC news that they were very concerned about the tax, and rightfully so. During the first two months the tax was enacted, one suburban distributor saw sales jump 20 percent, while for other city-based suppliers sales have plunged at least 30 percent.

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Beth Anne Mumford

The city’s larger businesses and beverage distributors are also struggling. Jeff Brown, CEO of Brown’s Super Store, said he “would describe the impact as nothing less than devastating.” And noted that, "in 30 years of business, there's never been a circumstance in which we've ever had a sales decline of any significant amount.” Brown has cut up to 6,000 hours of employment per week, which equates to about 280 jobs. Canada Dry and PepsiCo of Philly have also laid off 20 percent of their workforce since the tax went into effect.

On top of this, the city’s irresponsible miscalculation of projected revenue from the tax will likely cause a multi-million-dollar deficit. According to Alan Butkovitz, Philadelphia’s finance controller, the city is “creating a short-term and long-term deficit through the Beverage Tax by not budgeting with true and accurate collection figures.” He explains that the government has already allocated $92 million from beverage tax revenue next year, but at this rate they’ll fall around $14 million short — a deficit the city cannot afford.

In the City of Brotherly Love, we should be able to have an open and honest debate. Drowning out opposing views with blaring horns and loud shouts won’t change the fact that the soda tax a hurts low-income residents and local businesses and has resulted in a multi-million-dollar deficit. Philadelphians deserve better.

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Beth Anne Mumford is the Pennsylvania state director of Americans for Prosperity.