The Working Poor Aren't Finding Anything Sweet in Philly's Soda Tax

COMMENTARY Taxes

The Working Poor Aren't Finding Anything Sweet in Philly's Soda Tax

Feb 2nd, 2017 3 min read
COMMENTARY BY
Daren Bakst

Senior Research Fellow in Regulatory Policy Studies

Bakst studies and writes about agricultural and environmental policy and property rights, among other issues.

Philadelphia's experience with the "soda tax" should serve as a cautionary tale to other Pennsylvania cities.

With the dawn of 2017, the City of Brotherly Love launched an egregious attack on the freedom of its own citizens. 

Worse, the attack came primarily at the expense of the poor. I'm talking about the city's now-infamous "soda tax," which covers far more than sugar-infused soft drinks. The city council applies the tax to diet drinks and certain juices as well as any and all sugar-sweetened beverages.

When it comes to individual freedoms, the freedom to choose what you eat and drink is about as basic as it gets.  Yet, city council members apparently thought they weren't exercising enough control over your diet. And so last year they voted to impose the 1.5 cents-per-ounce tax on their constituents. 

According to the Tax Foundation, that punitive assessment is 24 times higher than the state tax on beer.

No wonder city residents reeled from sticker shock when this latest "sin tax" kicked in on Jan. 1. 

Though the council slapped the tax on distributors, the tax--as predicted--has been passed on to consumers.

Buying a 12-pack of a covered "soft" beverage could actually cost more than buying a 12-pack of beer. In some cases, the tax is nearly as much as the pre-tax cost of the beverages.

It takes a lot of arrogance for policymakers to think they should meddle in other people's dietary decisions and use severe tax-policy to "socially engineer" diets they find more acceptable. And, policymakers pushing these taxes completely ignore the complexity of diets. 

There's nothing inherently unhealthy about these taxed beverages.  An individual can drink soda and have a much healthier diet than someone who doesn't drink soda.  

Ironically, if people are incentivized to drink less soda, they may make up for the "lost" sugar intake by turning to other consumables that are even higher in sugar or calories, or detrimental to their health in other ways. For example, there's some evidence that such policies encourage consumers to switch to beer.

Even if soda consumption does decline, this doesn't mean that overall sugar consumption will decline or that there will be reductions in obesity. It simply means that soda or other sugar-sweetened beverages won't be consumed as much as before the tax. 

Of course, given the unusually broad reach of the Philadelphia soda tax, much of the tax doesn't even target sugar at all.


Then there's the obvious issue of getting Philadelphians to pay the tax.  City residents aren't forbidden--yet--from crossing the city line. They are still free to buy their soda outside the city--and that kind of rational behavior is already in evidence. 

This "exodus" of customers won't just hurt Philadelphia grocers and convenience stores.  It will also affect city restaurants, movie theaters, and any other establishments selling covered beverages.

As is so often the case with do-gooder "sin taxes," the soda tax will hit the poor the hardest.  The tax is highly regressive, meaning it hurts the poor at a disproportionate rate. 

Bureau of Labor Statistics data for 2015 show that the lowest-income households spent 33 percent of their after-tax income on food; the highest-income households laid out only 9 percent.

Those using food stamps will find their purchasing power reduced, since they'll have to cover the costs passed on to them through the soda tax.

Of course, politicians also view soda taxes as a great way to bring in more money, which can then be used to offset their financial mismanagement or grow government even more.

Mayor Jim Kenney sold the soda tax as way to finance programs such as Pre-K education.  In other words, "it's for the kids." (And so what if we have to sock it to the poor to do it?) 

No matter what you think about the need for early childhood education programs, it's hard to think of a worse way to fund them. 

Marie Antoinette said "Let them eat cake." And so, inevitably, we have elitists today who blithely say, "Let them drink water, if they don't want to pay more for soda."

However, government shouldn't be in the business of forcing people to make that choice.  Our free country was born in Philadelphia, making it even more chilling that such taxes could exist in this great city. Philadelphians should not be bullied by the council in deciding what to eat and drink.

This piece originally appeared in Harrisburg Patriot-News