Philly Soda Tax Breaks the Rules and Hurts the Poor

Mayor Jim Kenney (D-Philadelphia) has proposed a massive tax hike on the residents of his city. The soda tax, set at 3 cents an ounce, will be an added cost on top of the city’s existing 8 percent sales tax.  Today, a 67-ounce bottle of Coke is $1.99. Kenney's soda tax would add $2.01 to the price, more than doubling the cost.

Kenney says the tax will raise $400 million over five years to pay for a universal pre-K program. But, this is a cruel deception.   

The mayor’s proposal breaks all the rules on “Tax it or not” Situations:

1.       When you tax something more you get less of it.

2.       If X and Y are two locations, and if taxes are higher in X and lower in Y, consumers will have a greater incentive to shop in Y.

3.       Businesses don’t pay taxes. They pass the cost of all taxation onto their customers in the prices of the goods and services they sell

Imagine a scenario: Compare two states or two cities — one with a giant tax on beverages and one without. Then do your own calculation and analysis. The results should be apparent. States and cities with lower tax burdens always have higher and faster growing economies and personal incomes than in states or cities with rising tax burdens. For evidence, look at 1990s New York City. Under Rudy Giuliani New Yorkers' tax burden was reduced by nearly 20% – its lowest level in generations. Giuliani cut taxes 23 times, and the whole city benefited, from Wall Street to Main Street and from lower Manhattan to the Bronx.

Kenney’s tax on beverages is fundamentally unfair. First, the Kenney tax is regressive, betraying—for Democrats particularly—the sacrosanct principle of tax fairness. Mayor Kenney’s tax will disproportionately harm low-income individuals, as they spend a larger portion of their income on consumer goods like soda.

A soda tax will hurt Philly’s poorest families, and it won’t fund universal pre-K. Those who can will buy their beverages outside of the city’s limits. And, such arbitrary taxation will have businesses and jobs fleeing Philadelphia.

Kenney’s tax proposal is not a tax on Big Soda. It’s a tax on Philadelphia’s poorest residents.