As restrictive regulations become more popular in “progressive” areas, a favorite is quickly emerging. Additional fees on pre-sweetened drinks – often called soda taxes – are popping up across the nation. As previously reported by Liberty Nation, Chicago implemented its own in the first days of August. Just a day later, the Tax Foundation published their findings regarding a similar measure in Philadelphia, and advocates of the Nanny State nationwide had better pay attention. The report didn’t sugar coat it – Philly’s soda tax caused serious unforeseen issues and has, so far, failed in each of its stated goals.
The Philadelphia City Council levied a 1.5 cent-per-ounce (half the amount originally proposed) excise on non-alcoholic sugar-sweetened and diet beverages on June 16, 2016. Unlike most localities with such laws, the City of Brotherly Love didn’t pretend they were looking out for the health of the citizenry. Rather, officials admitted the law was simply to raise revenue – which they then promised to grant as funding for pre-k programs to “allow people to get their kids educated and move them out of poverty into taxpaying citizens.”
Of course, the money didn’t all go to those programs. The Tax Foundation found that, while initially pitched to fund pre-K, only 49% of the new revenues did so. Government employees got 20% to fund city projects and their own benefits. What remained went to other public works, like schools, libraries, and parks.
Since this particular tax was revenue-centric, diet beverages were included, even though they are calorie free. For political reasons, however, baby formula, medicine, and drinks more than 50% fruit, vegetables, or milk were excluded. The excise also raised the price of most beverages enough that beer is now cheaper, which likely spurred the first unforeseen side effect: more people buying alcohol rather than soda. The increase in beer consumption isn’t the only reason soda’s doing so poorly now; many simply buy their soda pop out of town to avoid paying extra:
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. This is likely primarily due to higher prices, which discourage purchasing beverages in the city. Some Philadelphia taxpayers took to Twitter as the tax took effect, noting their plans to shop for groceries outside the city. This kind of tax avoidance is only feasible for consumers with means of transportation, making the tax even more regressive.
Local businesses are hurting for sales overall, as many now shop for groceries out of town. As a result, local manufacturers, distributors, and retailers have been forced into massive layoffs – the local branches of Coca-Cola and PepsiCo reported letting go of 40 positions and between 80 and 100, respectively. Additionally, PepsiCo announced that it would pull all 12-pack and two-liter products from local businesses.
Due to the unexpected revenue losses, the city failed to meet its goals. In the first six months after the law went into effect, a total of $39,466,920 was collected – that’s over $6.7 million shy of their projected $46.2 million. Additionally, many of the impacted companies and displaced workers are suing the city. Both of these factors, along with the misleading percent granted to pre-Ks, significantly threatens these programs.
The law still has its supporters, but many Philadelphians feel betrayed. The experiment failed, and now the entire city suffers. While Nanny State laws in other localities focus ostensibly on health rather than revenue generation, consumer tax avoidance – perhaps the most damning factor in Philly – is an issue they’re all likely to face.
What do you think? Is it the government’s job to regulate our behavior “for our own good,” or do you find any law that doesn’t protect liberty a stretch? Are other cities and states bound to fail in this endeavor as well? Have an opinion on this issue? Let your voice be heard by commenting below!
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