Politics & Policy

Philly’s Drink Tax Is Hurting Consumers, Businesses, and the Poor

(Reuters photo: Shannon Stapleton)
The punishing new tax has sparked a backlash, for good reason.

Philadelphians are experiencing considerable sticker shock as the prices of their favorite beverages skyrocket because of the largest soda tax in U.S. history going into effect.

It will be hard for Philadelphians to avoid these price hikes because the city’s tax covers more than just sugar-sweetened sodas. It also applies to fruit drinks, sports and energy drinks, sweetened water, pre-sweetened coffee and teas (although coffee confections such as those created at Starbucks are excluded), and drinks used as mixers in alcoholic drinks (although the alcohol, which is high in both natural sugars and calories, is exempted from the tax).

To the distress of those trying to cut down on calories, Democratic mayor Jim Kenny, who designed and pushed for the beverage tax, included zero-calorie, sugar-free diet beverages. Thomas Farley, the head of Philadelphia’s health department explained that diet drinks are included because: “People will be less likely to switch from sugary drinks to diet drinks, but they may be more likely to switch from sugary drinks to water, and that is what we want” (emphasis mine). Because when dieting, an individual should always first consider what Mr. Farley wants.

Mary Story, a professor at Duke University’s Global Health Institute echoed Farley. Diet beverages “are filled with artificial sweeteners and chemicals,” she said. ”Do we really want people to drink these?” Consumers should ponder a different question: When did it become the prerogative of government and public-health officials, academics, and food activists to make my beverage decisions?

While food nannies have applauded Mayor Kenney’s claims that he’s trying to solve the obesity crisis, the reality is that beverage taxes do nothing to reduce obesity rates. But soda taxes do have an impact in one area: the success of small businesses. According to a new study on the effect of Mexico’s soda tax, which was implemented in 2015, in the first half of 2016 alone, 30,000 stores closed because of the financial strain of these soda taxes. Of those that survived, 93 percent saw a decline in profits.

Perhaps this tax will encourage more Philadelphians to do what city residents have been doing for decades: leave the city.

Sadly, the citizens of Philadelphia are in for similar hardships, particularly the city’s poor. Beverage taxes are regressive, meaning the poor will pay a larger percentage of their income on the tax. That’s partly due to the fact that the poor have a harder time leaving the city limits in order to take advantage of lower prices in the suburbs. According to the Pew Charitable Trust, Philadelphia has one of the highest poverty rates of the nation’s ten largest cities. Median household income in the City of Brotherly Love is far lower than the national average, with more than 400,000 Philadelphians living below the federal poverty line, including 37 percent of children and 43 percent of Latinos.

Perhaps this tax will encourage more Philadelphians to do what city residents have been doing for decades: leave the city. In the 1960s, Philadelphia ranked as the fourth-most populous city in the United States with just over 2 million residents. Today, Philadelphia’s population hovers at just over 1.5 million people. According to the Philadelphia Inquirer, this continued population decline is “symptomatic of a region that continues to struggle with high taxes, a city school system in chaos, and industries that aren’t hiring at the rates they did in the region’s heydays.”

If Philadelphia mayor Jim Kenney cared about his city, its residents, and the small businesses that operate in the city, he would scrap Philly’s punishing and very restrictive drink tax. It’s time politicians remembered their place — not as a parent who punishes misbehaving children, but as a public official meant to keep the peace and otherwise stay out of people’s lives.

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