DOES CITY COUNCIL really have to choose between running out of money or imposing a tax on sugary soda and drinks?
According to Mayor Nutter, that's the decision facing Council today. The mayor says the budget given preliminary approval by Council last week - which includes a 9.9 percent property-tax increase, a $300 fee for commercial trash collection, and a new tax on cigars and smokeless tobacco - doesn't generate enough revenue to fill a $150 million gap. Nutter warns that without an additional revenue, the city could run out of cash.
We're sensitive to those concerns, given that the current budget agreement would lower the city's fund balance to well below the 5 percent in reserves recommended by most municipal-finance advisers. And if the state budget is late again this year - meaning payments to the city for human services would also be delayed - you have the makings of a serious cash-flow problem.
Nutter says the solution is a tax on soda and sugary drinks. The tax, likely to be 1/2 cent or 3/4 cent per ounce, would raise between $9 million and $14 million for city government. Despite the very real concerns about running out of money, we're not convinced the new tax is the best way to tackle the problem.
Nutter already offered to reduce the overall level down from 2 cents per ounce, but his concession doesn't address the deep structural issues with the proposal. First of all, since it doesn't have the authority to impose a directed tax, the city would levy it as an excise tax on retailers who sell sugary drinks. Calculating the tax could be such a headache - and would require setting up new tracking systems - that many retailers are likely to simply spread the tax among all products, instead of just sugared drinks, thereby blunting the public-health impact of the proposal. (Vending-machine owners could either redesign their machines, or, more likely, hike the price across the board.)
The solution? Already, Councilman Frank DiCicco has proposed increasing the property-tax rate to 12 percent instead of 9.9 percent. This would generate enough revenue to keep the fund balance healthy without setting up an entirely new tax structure. Also, property taxes are deductible for federal tax returns, a benefit not available for people who pay the soda tax.
Of course, we'd be enthusiastic if the city could also find more ways to cut costs without devastating services.
But, if we're choosing between tax hikes, a property-tax increase is easier to swallow than the soda tax. *