Friday, June 17, 2016

Philadelphia's Soda Tax Is Not What It Appears to Be, But Will Be Sugar for Bootleggers

As usual, when it comes to major legislation, it’s not always what it seems. Philadelphia’s City Council voted 13-4 to impose a sugar “soda” tax of 1½ cent/ounce, joining Berzerkley as the only other city with a sugar tax. The first caveat is that it is not a sugar tax. It also applies to diet soda. Still not exactly a soda tax, The tax also applies to fruit juices, unless they are at least 50% natural juice. The exemption applies even if the juice contains added sugar. The purported purpose of the soda tax is to attack Philadelphia’s obesity problem. Studies show 68% of adults and 41% of children are overweight or obese in Philadelphia. That’s the purpose. It’s purely and simply a tax increase. It’s a highly regressive tax increase that, like other “sin” taxes, will hit the poorest the hardest. Philadelphia has a high poverty rate. The Mayor’s spokeswoman said “It was always about the revenue.” The Philadelphia soda tax is just yet another tax by government to fund an uncontrollable burgeoning public budget camouflaged by a deserving public good, in this case, universal pre-kindergarten, presumably to be taught by public sector union workers. Council Member Jim Kelley ran for Mayor of Philadelphia on the promise of universal pre-kindergarten. He won, but realized no funds existed in the City’s budget. He proposed a tax of three cents per ounce on sugared soda, which would add 60 cents to the price of a 20 ounce Coke. Past attempts to enact a soda tax in Philly on public health grounds failed. He thus changed the selling of the tax from public health to public welfare. The public was told the tax would pay for universal prekindergarten. It also included funds for community schools and recreational centers. Mayor Kelley said it was “an investment in our neighborhoods and in our education system today.” These activities would normally be funded out of the general budget, but Philadelphia is broke for the usual reasons: unfunded pensions, health benefits, combined with an oversized, over compensated public workforce. 20% of the tax revenues will go for other purposes. The new tax will also for city employee benefits, pet projects of council members, which can be a slush fund, and to fill the budget cavity. Shades of President Obama’s Stimulus bill with claims of “shovel ready jobs,” universal health care under ObamaCare, the universal pre-kindergarten is only 50%, 13 council members positively salivated at the prospect of a new revenue stream, not to mention their political slush fund. The legislation was debated in the council. The Mayor’s proposed three cents/ounce was reduced to 11/2 cents/ounce. It was broadened to include diet sodas and fruit juices. The City’s Finance Office estimates the tax will raise $91 million annually for five years. It won’t. The tax amounts to $2.16 per standard case of 12 twelve ounce sodas. Soda sales will drop in Philadelphia, but jump in the surrounding communities. A look at New York City’s cigarette tax will illustrate this point. Federal, state, and local taxes, amount to $5.85/pack in New York City. About half the cigarettes in New York State are smuggled into the state and an estimated 60% in New York City are illegal. Eric Garner died on Statan Island for selling “loosies” on the street – single, smuggled cigarettes. It will be a short term sugar high to the council members, but the underlying budget problem will persist. If the purpose of the “Soda Tax” is to promote public health and reduce obesity rates in Philadelphia, then it’s a poor way to do so. Philadelphia is not taxing candy, fast food, donuts, and the infinite other sources of sugar and calories. Philadelphia is famous for its fat, calorie laden Philly Cheesesteaks. Those deligious delights are untouched by the tax. Let us look at another failed experiment in reducing childhood obesity: Los Angeles’ ban on new fast food restaurants in poor South Central Los Angeles. Studies have shown the ban has failed. The children are getting their sugar and calories from too many other sources to be affected by the poorly drafted, but highly lauded LA ordinance. But then again, the purpose of the Philadelphia tax is not to reduce adult or childhood obesity. It is simply to raise revenues.

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