Council study: Less is more with soda tax
Mayor Kenney's proposed 3-cents-per-ounce soda tax would be the highest in the nation. But a look at the numbers begs the question: Does it have to be so stiff?
Mayor Kenney's proposed 3-cents-per-ounce soda tax would be the highest in the nation. But a look at the numbers begs the question: Does it have to be so stiff?
An analysis done by City Council, which would need to approve the tax, found that a 2.5-cents-per-ounce tax could actually bring in slightly more revenue, as it would trigger a smaller decline in soda sales.
It is yet another projection of how the tax would affect soda sales in the city. Kenney's finance team and the beverage industry have offered their own calculations.
Council projections, obtained by the Inquirer, show revenue estimates using three different "elasticity levels," a term used to calculate the rate of consumption decline when a product increases in price.
Kenney's projections say the 3-cent tax will raise about $95 million a year. Council's study showed that a 2.5 cent tax would raise a little more than that - $95.2 million (an additional 63,000 a year).
Lauren Hitt, spokeswoman for the Kenney administration, said the revenue department reached its projections using only whole cents. She said the administration is looking at Council's calculations.
"We want to do some additional research to verify the accuracy of those preliminary projections, but if we find that they come in the same or even slightly higher than 3 cents, we'd certainly be open to them," Hitt said. "We think it's fantastic that Council is clearly taking this proposal so seriously, and we look forward to working with them on other details of this proposal."
Council also looked at the American Beverage Association's much higher rate of consumption decline and found that a 2-cent tax - based on the ABA's elasticity rate - could bring in more than a 3-cent tax.
Larry Miller, spokesman for the anti-sugary drinks coalition, "No Philly Grocery Tax," said he wouldn't speculate on hypothetical figures.
"The administration continues to demonstrate a basic lack of understanding of its own proposal, which has created a tremendous amount of confusion in City Hall," Miller said. "Luckily, City Council has decided to ask the hard questions of the administration and realizes this is a proposal that has serious implications for Philadelphia businesses and families on many levels."
Kenney contends that he needs a 3-cent tax to raise $432 million to fund prekindergarten, community schools and to pay for a bond to rebuild libraries and parks.
Several City Council members and staffers, speaking not for attribution, said it's unlikely that a 3-cents-an-ounce tax would pass. Council's analysis, they said, confirms that a smaller rate would suffice.
"The math for 3 cents doesn't make a lot of sense," said Councilman Allan Domb, who still is on the fence about the tax. "It looks to me like the most productive is anywhere from one to 1.5 [cents]. That's where the bulk of the money comes from."
Estimates could always prove inaccurate. Only one soda tax exists in the nation - a 1-cent-per-ounce tax in Berkeley, Calif.
"Projections are projections. Nobody knows until it happens," said Councilman Mark Squilla, also undecided on the tax. "But I think the logic behind it is, the more you tax something, the less people use it."
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