Soda tax is tanking. What comes next?
When you raise the price of a product, fewer people buy it. Is that a surprise?
While the city government was preening over its victories in court, its tax on soda (actually about 4,000 beverages) is losing in the court of public consumption.
The sudden — no one expected this, right? — sales slump of items taxed up to the eyebrows has created a reversal of fortune for the city and for the pre-K that Mayor Kenney thinks "Big Soda" should pay for.
The numbers were a U-turn from a few months ago when the city reported $5.7 million from the tax in January, more than double the city's projection of $2.3 million. It was all so exciting you could hear bureaucrats chirping like sparrows in Dilworth Park.
Sure, the projections were wrong, but because the tax was generating more than expected, it was party time.
Now, suddenly — oops.
With the April figures in — $6.5 million in receipts, first reported by the Philadelphia Business Journal — the tax is generating less revenue than expected. In the words of the Three Stooges (the mayor is a fan, or was) hummada, hummada, hummada. The party's over.
Because numbers don't lie, the city is lowering its revenue projection. #Embarrassing.
It turns out — surprise, surprise! — when you raise the price of a product — whether it's soda or newspapers — fewer people buy it. And soda sales had been declining for a decade before the tax.
As an opponent of the tax, I don't want to gloat, but — tell the truth — don't you get a little thrill up your leg (hat tip, Chris Matthews) when the dorks with sharpened pencils, pocket protectors, and Texas Instruments calculators screw it up? I oppose the tax because it singles out a single industry to carry the load — pre-K and other improvements — that should be borne by all, as is the cost of education, policing, and social services. The tax is regressive, falling hardest on small retailers and the lower classes, who are the biggest consumers even if they shouldn't be.
When this was pointed out to Kenney, he told them to drink diet soda. That was before no-sugar diet soda was added to the list of beverages to be taxed at the punishing rate of 1.5 cents per ounce. Also before we learned that only half of the tax would go to pre-K, the rest to be scattered among rec centers, schools, parks, libraries, and — oh, did we forget to mention? — $41 million would go to the city fund balance. A clear case of bait-and-switch.
Particularly despicable was Kenney's name-calling and demagoguery in demanding that "Big Soda" pay up and shut up. Soda products were driven out of public schools, but the industry was told to fund pre-K.
That's just chutzpah.
And don't go playing the sugar-is-death card, because the mayor never even made the health argument and opposed a less burdensome soda tax a few years back when he was on Council and it was proposed by Mayor Nutter. Kenney's face isn't attractive enough for him to want to have two of them.
If you were paying attention, you may have noticed that the January revenue of $5.7 million was double the city estimate, while the $6.5 million in April was below projections.
That's because the tax first bit in January and estimates were lower in the early months because it would take awhile for everyone to sign up for the tax. The fiscal year ends June 30 and the tax won't bring in the expected $46.2 million.
Is it too early to ask what will happen if soda sales (at least within the city limits) keep dropping and not enough is generated for the goodies in the Kenney grab bag?
If it's "for the children," something will have to be taxed.
Soft pretzels? Cheesesteaks? Tastykakes? Water ice? Scrapple? Wait, I know!
Chick-fil-A, of course.