Not National News: Philly's Once Heralded 'Soda Tax' Has Been a Spectacular Failure

The national press could barely hide its glee in June 2016 when Philadelphia passed a "soda tax" of 1.5 cents per ounce levied against non-alcoholic beverages containing "any form of artificial sugar substitute, including stevia, aspartame, sucralose, neotame, acesulfame potassium (Ace-K), saccharin, and advantame."

Now that the predictions of opponents have virtually all come to pass, accompanied by unintended consequences even they didn't anticipate, the national press is barely interested.

Coverage at the New York Times when the soda tax passed 14 months ago carried a video where the head of Healthy Food America, whose self-admitted primary reason for being is to advocate for the passage of "taxes on sugary drinks" throughout the land, described the tax as "a historic moment for public health." Times reporter Margot Sanger-Katz virtually celebrated Mayor Jim Kenney's underhanded passage strategy, admiring how "he cast the soft drink industry as a tantalizing revenue source that could be tapped to fund popular city programs, including universal prekindergarten."

The tax, which in certain instances has topped 100 percent, went into effect on January 1. Here are the lowlights identified in a Tax Foundation report issued on August 3 concerning what has since transpired (bolds are mine throughout this post):

  1. Philadelphia’s beverage excise tax is ... 24 times the Pennsylvania excise tax rate on beer.
  2. The high tax rate on nonalcoholic beverages makes them more expensive than beer in some cases. Prior research on soda taxes suggests they are likely to drive consumers to more alcoholic beverage consumption.
  3. Philadelphia’s beverage tax applies to diet beverages, despite those beverages having no impact on caloric intake.
  4. Beverage tax collections were originally promoted as a vehicle to raise funds for prekindergarten education, but in practice Philadelphia awards just 49 percent of the soda tax revenues to local pre-K programs.
  5. Soda tax revenues are likely below expectations due to consumer mobility. Some soda consumers may drive out of town to buy groceries, rather than pay the higher taxes.
  6. Poor revenue performance of Philadelphia’s beverage tax threatens the sustainability of the programs it funds.

Concerning Point 4, "A June news release by the Office of the Controller noted that none of the monthly collections have met the $7.7 million per month target needed to meet the original 2017 estimate." The city projected that it would collect $46 million during the first six months of 2017. Instead it collected only $39.4 million.

Also concerning Point 4, the city deliberately lowballed its predicted collections for the month of January so it could brag about meeting expectations. Sadly, as was noted in a separate Philly.com op-ed, this profoundly dishonest strategy was politically astute:

While the tax is fresh on their constituents’ minds, officials can point to the success of the first month’s artificially low projections, as they did. City officials and politicians get to claim credit for the tax’s superficial success early on but do not have to defend it later when the cracks start to appear because the public largely has moved on to the next news cycle.

Additionally, the Tax Foundation reports, with linked support, that:

"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. According to some local distributors and retailers, sales have declined by nearly 50 percent. ... the decline in consumption is worse than predicted."

"... stories have emerged of harm to local manufacturing and convenience store workers and reductions in consumer choices."

"For example, local branches of Coca-Cola report a workforce downsizing of 40 positions and PepsiCo reports laying off 80-100 workers as a result of decreased soda sales from the tax. PepsiCo further announced that it would be pulling all 12-pack and 2-liter products of its brands from Philadelphia grocery and convenience stores and other vendors."

In one particularly poignant example just last week:

CC Orlando & Sons, which baked countless wedding and holy communion cakes and pastries since its founding ... in 1948, closed."

... business was off 60 percent since the soda tax went into effect Jan. 1 ... (as) customers simply crossed the nearby city line to avoid the higher prices for juices, milk and other sweetened drinks typically purchased with doughnuts and pastries.

... Sunday’s crowd at the store ... was in tears over the closing and the layoff of the five workers, who were like family.

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The Associated Press has no story on Philly soda tax developments at its main national site. At its APnews.com site, which is a mixture of AP-written stories and those produced by others, there are four listings which all link to the same story found at Philly.com about how Cook County in Illinois has just imposed a similar tax. The New York Times has nothing current. Results from a Google News search show very little interest in covering recent developments at the major national establishment press outlets.

Cross-posted at BizzyBlog.com.

Economy Business Coverage Taxes Bias by Omission Labeling Liberals & Democrats Associated Press Major Newspapers New York Times Philadelphia Inquirer Jim Kenney