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Two views on how tax would hit soda consumption

Mayor Kenney's administration expects to see a 55 percent drop in consumption of sugary drinks in the first year should its controversial plan to tax them be approved.

Mayor Kenney's administration expects to see a 55 percent drop in consumption of sugary drinks in the first year should its controversial plan to tax them be approved.

The sales drop-off estimated by the soda industry is 79 percent. Those competing projections also lead to different revenue estimates, numbers more than $150 million apart.

The divide is important, considering the long list of projects Kenney hopes the tax will fund, including universal pre-kindergarten.

When presented with the other's calculations, neither side is reaching for its erasers.

"To inflate those numbers to make it look like it's going to be more successful than it is would only hurt us in the end," Kenney spokesman Mike Dunn said. "Because we're going to be around for four years."

"The mayor isn't going to make his bogey on this tax," said Kevin Dietly, an economist for the American Beverage Association. "And it's going to get worse over time."

The 3-cents-per-ounce tax would apply to drinks with added sugar, but not to diet beverages. Under Kenney's proposal, it would fund pre-K, the creation of community schools, the rebuilding of parks and recreation centers, and other projects.

Kenney's administration, in new numbers released Monday, said the tax would reap $432 million over five years. The soda industry, in a study done by Dietly, totaled the revenue at $279 million.

The sides are on different pages mainly because they disagree on how consumers will react to the tax.

"It could be folks switching to a different type of beverage," said Deputy Revenue Commissioner Marisa Waxman. "It could be folks abstaining. It could be folks buying elsewhere."

Waxman said the city is assuming consumers will wind up paying only a portion of the tax, with the remainder being covered by distributors and retailers. In that instance, the impact at the cash register would be less severe and consumers would have less pressure to go elsewhere.

Dietly is assuming consumers will largely look to avoid the tax by buying outside the city.

"Philadelphia or any city, especially a city near a [state] border, is the definition of substitution opportunities," he said.

The numbers released Monday by the city project that prices of sugary drinks will increase on average by 55 percent. Because the tax would be levied on distributors, it is not clear how much of that increase would be passed to the consumer.

Rob Dubow, the city's finance director, on Monday also acknowledged a mistake in the soda tax legislation, introduced to City Council this month, that resulted in a higher proposed tax on fountain soda than bottled or canned drinks.

It was reported Friday that while the administration has described the plan as a three-cents-per-ounce tax, it would actually tax fountain soda 50 percent higher, at 4.5 cents per ounce.

Dubow said the Kenney administration, as a starting point for its bill, used one drafted by Mayor Michael Nutter's administration. Dubow said he does not know why that bill included the higher rate for fountain soda but said the error was a "holdover from the old legislation" and was not caught before Friday.

He said the higher rate for fountain soda was not factored into the city's projections.

"Really, it's just something we didn't pick up as we worked off the legislation that we had," he said. "And now we'll work to correct it."

Dubow was a member of Nutter's cabinet when the former mayor twice proposed a soda tax.

Asked if he knew Nutter's legislation also included the higher rate for fountain soda, Dubow said he did not. If he knew, he said, "I would have changed it."