Soda tax is a nuisance, but not evil | Editorial

Philadelphia retailers say they are losing money because of the city’s beverage tax.

City Controller Alan Butkovitz has mounted yet another attack on Philadelphia’s sugary drink tax. He took a survey asking the city’s retailers if soda sales have declined since the tax was imposed by the Kenny administration at the beginning of the year.

The answer is yes. Most of the businesses reported revenue losses of more than 10 percent. But a detrimental effect on store owners isn’t proof that the beverage tax has been bad for Philadelphia.

The tax has generated close to $53 million in revenue in the first eight months of this year. Those proceeds are being used to provide 2,000 additional pre-kindergarten seats for children under five, fund community schools that serve 6,000 older students, and support Mayor Kenney’s Project Rebuild, which is making repairs to parks, recreation centers, and libraries.

Nobody likes new or higher taxes. But if any city wants to start new programs, it must get the money from somewhere and most of Philadelphia’s tax money is already spoken for.

Some people have suggested the city raise its wage tax to pay for Kenney’s new programs.  Everyone in favor, please raise your hands.

The city is instead taxing sugary drinks produced by global multi-billion-dollar corporations like Pepsi and Coca Cola, whose deep concern for retailers does not include trimming wholesale prices a bit to absorb some of the tax. (As a point of interest, carbonated beverages accounted for $10 billion in U.S. sales in 2015, and according to industry publication Supermarket News, is ranked first in all items sold at grocery stores. Aside from the shock of that fact — that we buy more soda than anything — comes a better understanding of the stakes for the companies that sell the stuff.)

The beverage companies would rather spend millions in an anti-tax campaign while being helped by politicians like Butkovitz, who imply that the tax is sort of a local version of the Irish Potato Famine.

The tax is a nuisance, but not evil. Its revenue is going to good causes. And there is some evidence that collections will eventually rebound to the $7 million a month projected by the mayor’s office.

Consider the 10-percent tax the city enacted on the sale of liquor and beer sold at bars, restaurants, and retail stores, with the revenue earmarked for public schools. When introduced in 1994,  people were up in arms, predicting bars would become empty wastelands without any customers.

Maybe there was a dip in the beginning after the liquor tax was imposed, when that five-dollar beer suddenly cost $5.50. But, people adjusted and in the last two years alone, income from the tax has gone up from $53 million in 2015 to $73 million last year, a 40 percent increase. Initial projections called for $10 million in revenue.

How do we know about this success story? Butkovitz told us so in his office’s June 2017 economic report. The same Butkovitz who just rode over the hill to smite supporters of the sugar tax.