Philly soda tax makes soft drinks more expensive than beer

If the definition of "crazy" is doing the same thing over and over again while expecting a different result, then the Democrats who run the city of Philadelphia should all be locked up in a lunatic asylum.

City fathers imposed a whopping 1.5-cent-per-ounce tax on sugary drinks.  They confidently looked forward to a massive revenue stream from people who they believed were not going to notice how expensive soda would become.

But in the case of the soda tax, people who buy both beer and soda for their families couldn't help noticing that suddenly, they were paying more for soda than beer.  This began an exodus of people to the suburbs to buy both beer and soda, and probably a lot more.

The result?  The increase in revenue is not materializing.  Yes, but Philadelphians will thank the politicians when they start losing all that weight, right?

Right?

Washington Free Beacon:

Philadelphia's tax on sugary drinks has made soda more expensive than beer in the city.

The Tax Foundation released a new study on the excise tax last week, finding that the 1.5-cent per ounce tax has fallen short of revenue projections, cost jobs, and has forced some Philadelphians to drive outside the city to buy groceries.

The study finds that the tax is 24 times higher than the Pennsylvania tax rate on beer.

"Purchases of beer are also now less expensive than nonalcoholic beverages subject to the tax in the city," according to the study, written by Courtney Shupert and Scott Drenkard. "Empirical evidence from a 2012 journal article suggests that soda taxes can push consumers to alcohol, meaning it is likely the case that consumers are switching to alcoholic beverages as a result of the tax. The paper, aptly titled From Coke to Coors, further shows that switching from soda to beer increases total caloric intake, even as soda taxes are generally aimed at caloric reduction."

The Tax Foundation points out that unlike most cities, Philadelphia passed the tax specifically to raise revenue, not to fight obesity. The city even includes diet sodas in its tax, as a way to raise money for pre-kindergarten programs.

However, less than half of the $39.4 million collected since the tax went into effect on Jan. 1 has gone to education funding.

"[T]he tax was originally promoted as a vehicle to raise funds for prekindergarten education, but in practice it awards just 49 percent of the soda tax revenues to local pre-K programs," Shupert and Drenkard write. "Another 20 percent of the soda tax revenues fund government employee benefits or city programs, while the rest of the money will go towards parks, libraries, and community schools."

Collections from the soda tax are also well below original projections of $92 million per year, due to tax avoidance.

"Soda sales in Philadelphia have also declined since the tax went into effect at the beginning of 2017, threatening the long-run sustainability of the tax," Shupert and Drenkard write. "According to some local distributors and retailers, sales have declined by nearly 50 percent. This is likely primarily due to higher prices, which discourage purchasing beverages in the city."

Pepsico, the parent of Pepsi, has laid off 100 workers in the city due to a 43% drop in sales.

The tax disproportionately hits those who are least mobile and unable to drive to the suburbs to buy cheaper soda: the poor and elderly.

You can bet that every dime earmarked to pay city employee benefits is being collected and spent.  Otherwise, not so much.  This should not come as a surprise to anyone.  It's an economic equation easily mastered by freshmen in high school: make something more expensive, and you get less of it.  It's incredible that politicians nationwide can't wrap their minds around this concept when they jack up "sin" taxes on soda, alcohol, tobacco, and legal gambling and then expect their revenue projections to hit the mark.

As I said, crazy.

If the definition of "crazy" is doing the same thing over and over again while expecting a different result, then the Democrats who run the city of Philadelphia should all be locked up in a lunatic asylum.

City fathers imposed a whopping 1.5-cent-per-ounce tax on sugary drinks.  They confidently looked forward to a massive revenue stream from people who they believed were not going to notice how expensive soda would become.

But in the case of the soda tax, people who buy both beer and soda for their families couldn't help noticing that suddenly, they were paying more for soda than beer.  This began an exodus of people to the suburbs to buy both beer and soda, and probably a lot more.

The result?  The increase in revenue is not materializing.  Yes, but Philadelphians will thank the politicians when they start losing all that weight, right?

Right?

Washington Free Beacon:

Philadelphia's tax on sugary drinks has made soda more expensive than beer in the city.

The Tax Foundation released a new study on the excise tax last week, finding that the 1.5-cent per ounce tax has fallen short of revenue projections, cost jobs, and has forced some Philadelphians to drive outside the city to buy groceries.

The study finds that the tax is 24 times higher than the Pennsylvania tax rate on beer.

"Purchases of beer are also now less expensive than nonalcoholic beverages subject to the tax in the city," according to the study, written by Courtney Shupert and Scott Drenkard. "Empirical evidence from a 2012 journal article suggests that soda taxes can push consumers to alcohol, meaning it is likely the case that consumers are switching to alcoholic beverages as a result of the tax. The paper, aptly titled From Coke to Coors, further shows that switching from soda to beer increases total caloric intake, even as soda taxes are generally aimed at caloric reduction."

The Tax Foundation points out that unlike most cities, Philadelphia passed the tax specifically to raise revenue, not to fight obesity. The city even includes diet sodas in its tax, as a way to raise money for pre-kindergarten programs.

However, less than half of the $39.4 million collected since the tax went into effect on Jan. 1 has gone to education funding.

"[T]he tax was originally promoted as a vehicle to raise funds for prekindergarten education, but in practice it awards just 49 percent of the soda tax revenues to local pre-K programs," Shupert and Drenkard write. "Another 20 percent of the soda tax revenues fund government employee benefits or city programs, while the rest of the money will go towards parks, libraries, and community schools."

Collections from the soda tax are also well below original projections of $92 million per year, due to tax avoidance.

"Soda sales in Philadelphia have also declined since the tax went into effect at the beginning of 2017, threatening the long-run sustainability of the tax," Shupert and Drenkard write. "According to some local distributors and retailers, sales have declined by nearly 50 percent. This is likely primarily due to higher prices, which discourage purchasing beverages in the city."

Pepsico, the parent of Pepsi, has laid off 100 workers in the city due to a 43% drop in sales.

The tax disproportionately hits those who are least mobile and unable to drive to the suburbs to buy cheaper soda: the poor and elderly.

You can bet that every dime earmarked to pay city employee benefits is being collected and spent.  Otherwise, not so much.  This should not come as a surprise to anyone.  It's an economic equation easily mastered by freshmen in high school: make something more expensive, and you get less of it.  It's incredible that politicians nationwide can't wrap their minds around this concept when they jack up "sin" taxes on soda, alcohol, tobacco, and legal gambling and then expect their revenue projections to hit the mark.

As I said, crazy.

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