Philadelphia lawmakers have approved a new tax on soda and other sweetened beverages.
The lawmakers say the purpose of the tax is raise additional revenue to fund an expanded government preschool education program for local children.
Starting in January 2017, the new law will add a tax of 1.5 cents per ounce to the price of soda and other sweetened beverages sold in the city.
Taxing Low-Income Philadelphians
Bob Dick, a policy analyst with The Commonwealth Foundation, says the new tax is regressive and will have a negative impact on low-income earners in the city.
“It’s going to fall on those who can least afford it, and it’s definitely not the way to provide opportunities to low-income Philadelphians,” Dick said.
Dick says Philly lawmakers should be reducing spending instead of grabbing more money from consumers.
“If you’re raising taxes, obviously you’re not looking at other ways to control spending or reduce spending, and government generally isn’t living within its means,” Dick said. “Instead, it’s going to low-income people in Philadelphia and asking them to pay more for what politicians feel is important for the city.
“It’s just a way to give [lawmakers] a blank check for them to spend on whatever they want,” Dick said.
Soda Slush Funds
William F. Shughart II, an economics professor at Utah State University, says lawmakers often use sin-tax revenue as a way to divert money into other spending programs.
“Whenever the revenue from a tax is earmarked for a specific spending program, whether it’s roads or pre-K schools, what happens usually is that general fund revenue that would have gone to that program is reduced almost dollar-for-dollar by the amount of earmarked tax that comes in for that specific program,” Shughart said. “The total amount spent on the program doesn’t change.”
Shughart says consumers lose out when lawmakers impose sin taxes.
“Invariably, it has an effect on consumer prices equal to the amount of the tax being handed to them,” Shughart said. “Diet sodas are not subject to the tax, so people substitute diet for sugary drinks or buy their sugary drinks outside the city limits.”
Ben Johnson ([email protected]) writes from Stockport, Ohio.