In the run-up to Pennsylvania’s primary elections, one presidential candidate condemned Philadelphia’s proposed soda tax, saying, “A tax on soda and juice drinks would disproportionately increase taxes on low-income families in Philadelphia.” You might expect this to come from the tax-averse Republican Senator Ted Cruz or business-friendly Donald Trump—but you’d be wrong.
It was Democratic Senator Bernie Sanders, a self-styled champion of the little guy and otherwise unafraid to back tax increases. No matter whom you voted for, Sanders undeniably has it right, and Philadelphia’s Mayor Kenney has it wrong.
As a member of Philadelphia City Council, Jim Kenney twice voted against increasing taxes on sugar-sweetened drinks to fund more government spending. As mayor, he has reversed his position and proposed a tax hike that would add $2.16 to the cost of a six-pack of soda. His regressive plan is the wrong policy at the wrong time for Philadelphia.
Kenney’s scheme is flawed for numerous reasons. For starters, it’s unfair to the city’s poorest residents. Philadelphia’s 26 percent poverty rate is the highest among the nation’s largest cities. Likewise, the city’s unemployment rate persistently tops the national average. Too many in the City of Brotherly Love struggle to make ends meet. Kenney’s tax would nearly double the average cost of a 12-pack of soda – hitting hardest those who least can afford it, not to mention small retailers, bottlers, and restaurants.
Pennsylvanians, and particularly Philadelphians, are already overtaxed. The commonwealth’s state and local tax burden ranks 15th highest in the nation, according to the nonpartisan Tax Foundation. A 2015 study by Washington, D.C.’s Chief Financial Officer compared combined tax levies among each state’s largest city, considering automobile, income, sales, and property taxes. The finding? Philadelphians making $25,000 a year have the highest tax levy for that income level among all cities studied, at nearly $4,250.
Adding a soda tax would not only exacerbate this over-taxation but also invade the one area where Philadelphians aren’t currently taxed: the grocery store.
Those who claim consumers won’t notice the price change should learn a lesson from the cigarette tax. Targeting cigarettes for additional levies has often led to more cross-border cigarette purchases and increased cigarette smuggling. In fact, more than 14 percent of all cigarettes consumed in Pennsylvania in 2013 arrived via illegal, long-haul, large shipments, or organized smuggling.
Given Philadelphia’s proximity to New Jersey, Kenney’s plan would create a strong incentive to cross the river to avoid the onerous tax. It is no wonder John Holub, president of the New Jersey Retail Merchants Association, recently wrote, “For Philadelphians worried about their grocery bills going up: New Jersey is open for business. We’re only a short drive away, and you can buy your favorite beverages here for half the cost.”
Furthermore, the “soda tax” goes far beyond soda. Virtually every beverage with added sugar sweetener – fruit juices, sports drinks, and energy drinks, among others – would be subject to the tax. At the same time, the tax would not apply to other household items with sugar sweeteners like cookies, candy, and ice cream. Indeed, the plan has little to do with encouraging healthy living and everything to do with taking more from Philadelphians’ pocketbooks.
While ensuring pre-schools and libraries have adequate resources is a noble endeavor, asking the city’s poorest residents to shoulder a disproportionate share of this burden is unfair and ill advised. That’s not to say leaders should simply find different pockets to empty for their proposal. Far from it. Instead, the City Council should better prioritize spending and identify potential waste—including evaluating questionable pension perks and bonus plans for city workers. This would serve the city far better than increasing the tax load already shouldered by overtaxed and struggling Philadelphians.
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Pete Sepp is president of the National Taxpayers Union. Matthew Brouillette is president and CEO of the Commonwealth Foundation.