Wednesday, February 10, 2016

Editorial: Not so sweet on soda tax

Last week, Mayor Nutter presented his budget proposal to City Council. It included a new tax on soda and sugary drinks, aimed at reducing obesity. That might sound like a worthy goal, since more than half of the city is overweight and we keep getting heavier.

Editorial: Not so sweet on soda tax

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Former Philadelphia mayor John Street comments on the soda tax by holding a bottle of Coca-Cola.
Former Philadelphia mayor John Street comments on the soda tax by holding a bottle of Coca-Cola. ALEJANDRO A. ALVAREZ / Staff Photographer

Last week, Mayor Nutter presented his budget proposal to City Council. It included a new tax on soda and sugary drinks, aimed at reducing obesity. That might sound like a worthy goal, since more than half of the city is overweight and we keep getting heavier.

But today's editorial in the Daily News argues that the tax's structure may be fatally flawed.

Most taxes designed to encourage healthier behavior (often called sin taxes) are levied at the point of sale, like tobacco. That shows consumers they are paying more for an unhealthy product. Nutter's soda tax wouldn't work this way

Instead, it would be directly paid by businesses selling these products.

Retailers will have to calculate exactly how many drinks they sell, how many of those are sugared, report that amount to the city, then get assessed a 2-cents-per-ounce tax on that amount. That means a new set of accounting tasks, which may not be a problem for big retailers like WalMart, but could be for smaller ones. By the time they have to pass this tax onto consumers, retailers could decide it's easier to spread the hike across all products, not just sugared soda.

Why did the city decide to go this route instead of taxing at the point of sale? Well, taxing soda directly would require authorization from the state legislature. The city suffered through that process last year when it asked Harrisburg to approve a sales tax hike. The legislature took longer than expected, costing the city $20 million. The mayor isn't eager to go down that route again.

As the budget process continues, we'll have more coverage of Nutter's proposals. In the meantime, what do you think? Does this soda tax sound like a good idea or should Nutter go back to the drawing board?

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Every year, city government spends slightly more than $4 billion. Where does all that money come from? More importantly, where does it go? Are we getting the most bang for our tax buck? “It's Our Money” is a joint project between Philadelphia Daily News and WHYY, funded by the William Penn Foundation, designed to answer these questions.

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