Soda Fee Not As Taxing As We Think

By Jacob Lambert
Add Comment Add Comment | Comments: 4 | Posted Mar. 23, 2010

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To say that Mayor Nutter’s proposed “Healthy Philadelphia Initiative”—the two-cents-per-ounce junk-drink tax—is in disarray would be charitable. City Council grows increasingly hostile toward the plan. A loophole might negate its stated health goals. Bottlers and drivers worry that the tax will cost them their jobs. And soft-drink lobbyists and others—most notably, a Coke bottle-wielding John Street—claim that the tax will burden the poor.

Many opponents of the bill have a right to be concerned. This new tax would most likely force soda drinkers off the sauce, and a citywide decrease in purchases would inevitably lead to some degree of job loss for convenience-store owners and workers at the area’s three bottling plants. While the job-loss numbers being pushed by the industry are likely inflated —“1,000 of 13,000 food-store jobs” and “2,000 area jobs in the beverage industry,” according to the Inquirer —any addition to the city’s bloated 10.6 percent unemployment rate is unwelcomed. For Coke and Pepsi, the “jobs” argument is a shrewd one, given the general teeth-gnashing over the economy.

But the other popular stance against the bill—that it’s an attack against the poor—stands on less solid ground.

Invoking “everyday working poor people” while waving his empty bottle, Mr. Street proclaimed, “Coke costs a dollar eighty-nine cents; the tax would be $1.34 … that’s a 70 percent tax.” His assessment was championed by Alvin Pothoff, who wrote at the Republican Action Network’s website of the tax’s effects on a fictional, chocolate milk-swilling “Little Jimmy”:

[Because of the tax,] Jimmy’s weekly total increases 12 percent by the end of the week to over $14 … this is a large increase to a low-income family … This would be a tax of more than $38 a month for a family of three who consume two servings of chocolate milk a day ... Street called this tax what it is, a tax on the poor.”

Both Street and Pothoff are accurate in their calculations. And as Isaiah Thompson noted in a recent City Paper column, “soda drinkers [are] more likely to be lower income, less educated and non-white.” But the effect that the tax will have on the poor is based on assumptions about the consumers.

In Pothoff’s view, once the drink tax takes hold, Little Jimmy—as well as Philadelphia’s real-life Quik enthusiasts— will be incapable of drinking less chocolate milk. John Street, too, puts little faith in “everyday working poor people” by implying that they’ll be helpless to muster slight shifts in an inessential habit. But both researchers and industry followers believe that Philadelphians—whether poor and/or uneducated—will do just that, predicting a 25 percent drop in sales.

So the tax would affect the poor, but not for very long. Once that “70 percent tax” brings each purchase into focus—Is this jug of syrupwater really necessary?—soda, one hopes, would return to its traditional role: an every-so-often treat.

This is not to say that Nutter’s plan is genius (or that its anti-obesity aspect is much more than a lucky two-for-one). The bill’s critics are right to call it a contradictory mess—the idea that the city hopes to make $77 million in perpetuity from a tax that will force plunging consumption is questionable. But weigh the beverage tax against Nutter’s other loathed proposal: the $300 annual trash fee. The euphemistic “Keep Philly Clean” tax would be the same in Mantua and Society Hill, and, most importantly, its payment would be obligatory. There would be no such imposition on the purchase of Barq’s.

 

If Philadelphians really want to witness a true affront to the poor, they need look no further than across the Delaware. With his first proposed budget last week, New Jersey Gov. Chris Christie called for “decisive action to reduce state spending.” This included a $1.3 billion cut to school and city aid, suspensions to promised property tax rebates and a contraction of a tax-freezing program for seniors.

Garden State residents took an unusually hard hit, one that will unequivocally harm the poor: cuts to child-care programs, school lunches and tax credits for the working poor. One community-college scholarship program will halt new enrollment, and welfare for the “able-bodied” will be eliminated. This is in addition to Christie’s February cut to NJ Transit, which will impose a 25 percent fare increase on commuters. Earlier this month, the new governor dropped the entry ceiling for the state’s subsidized health-care program—from $77,000 to $29,000 for a family of four.

Given New Jersey’s fiscal apocalypse, such carving was necessary. In the face of an $11 billion deficit, it would be irrational to expect Christie not to pare these programs (and given Philadelphia’s dour prospects. similar hacking may be in our own future). But New Jersey’s cuts might not have been so deep, or even necessary, had Christie reinstated a 2009 tax increase on residents earning more than $400,000. Its renewal would have brought the state close to $1 billion; by letting the tax lapse while simultaneously whacking the poor, Christie seems more callous than tough.

But Christie’s anti-tax stance is, after all, what got him elected: “I was not sent here to approve tax increases; I was sent here to veto them,” he said last Tuesday. “It is time for the tax madness to end.” No doubt these are fraught times in the Garden State, yet for its residents there is a small silver lining: from the Highlands to Cape May, they can unwind with a cold, refreshing can of Mountain Dew—still a bargain at just 75 cents. ■

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1. David said... on Mar 25, 2010 at 07:43AM

“Don't the bottlers have alternatives they can bottle and sell, items not subject to the sugary drinks tax? Don't they claim to be innovative in product development, manufacturing and marketing as companies? Or is selling flavored, bubbly sugar water just easy for them, the masses flocking for that sweet drink. Then benefit of (if) implementation would be to cause some frantic product development and testing of a line of beverages, acceptable to the consumers and the corporate bottom line. This is a chance at evolving the bottled drink economy in Philadelphia into something that can serve the growing demographic (with money) to buy other products. Think of the labs and marketers who can earn business with new products coming down the pipeline. We all know how bad the product is (if you drink it everyday) and one day people will be educated and make better choices. Better for the industry to be ready for that day than to wither away from declining sales when people "smarten" up.”

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2. Vince said... on Apr 14, 2010 at 04:59AM

“I like how the author slides in a little Christie bashing into an article about taxing soda. Gov. Christie isn't launching an affront to the poor but rather to uncontrolled taxing and spending of monies that the residents of New Jersey have earned. Basically its and affront to income redistribution.

Can't afford child care or lunch for your kids...hint, don't have children. By tax credits for the "working poor", do you mean giving money to those who pay no taxes anyway? It's not the governments responsibility to feed you, put clothes on your back, care for your child, subsidize your rail-pass and especially pay for your health-care if you make $77k a year. It's your responsibility as an adult.

We all worry about Obama turning the USA into a Socialist country, but we're already three. Gov. Christie is simply reversing that trend and letting the taxpayers for NJ keep they money the have earned. History show that higher taxes bring in LESS revenue. Don't believe me? Google.”

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3. persephone said... on May 15, 2010 at 07:52AM

“'We all worry about Obama turning the USA into a Socialist country' ???? I guess some of us are not 'we all'. I am much more worried about socialist paranoia. Those of you who want to 'reverse the trend': how about giving up your social security, the most socialist program we have? Maybe the tea partiers should be throwing soda in the harbor!”

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4. Anonymous said... on Jun 14, 2011 at 11:16PM

“The city of Phila already over taxes it's residents, with a local tax that was supposed to be temporary and an additional sales tax. They are dreaming. They will in no way make the money they are expecting because people will just purchase outside the city or not at all, either way the city loses in the end. This city needs to clean out the corruption and over spending and they might just find that they have more than enough money to make it. Why is it that other states such as Fla seem to do ok without all the additional local taxing. As for me, I am leaving this city far behind as soon as the finances allow - within the next 3 yrs. Selling the house and running. Between the growing ignorance, crime and taxes in this city it is no longer a pleasant place to live. They are driving everyone away. They never think of the consequences of their actions instead they let the greed rule, look where that has gotten the rest of the economy.”

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