The plan was monetarily supported by former New York City Mayor Bloomberg to the tune of $1.6 million. At the time he said, “Obesity and poverty are both intractable national problems. No policy takes a more direct aim at both than Philadelphia’s tax on sugary drinks,” and promised future funding to “level the playing field” against the soda industry for every city wishing to tax sugary drinks. Presidential candidate Hillary Clinton also weighed in saying that funding pre-K was very important and if Philadelphia’s soda tax was the way to do it, then that was the way to go.
After Philadelphia’s tax became law, things began to look quite different down at city hall. The tax which was assessed on the soda manufacturers ended up being passed on to the retailers who passed it on to the consumers. Mayor Kenney and his council were livid, deceptively claiming the tax was never supposed to be passed on to the consumer. Of course, the standard liberal rant about big corporations’ greed followed suit and the Mayor’s liberal cohorts gathered ‘round to buttress his claim that he had been hoodwinked by the soda industry. There was some hoodwinking going on, but it was more on the mayor’s part than anyone else’s.
Philadelphia’s mayor and council attempted to paint themselves as unaware that the soda tax would have the results it did. After all, they meant well. But when that tax hit the market place, the poor were affected by it just as much or more so than the other residents of Philadelphia. Any idiot would have known that a tax on soda would result in lower sales and lower revenues. As usual, taxing the general public to help the less fortunate helped neither one.
Now, unless this mayor and his council were brainless or naïve—having never studied a single business model in their respective lives—they would have known from the git-go that this tax was going to end up on the back of the consumer. Of course they knew! Their rant about the manufacturers passing along the tax was only designed to cover their butts. How do I know that? Because for all their outrage, they kept the tax in place. As we all know, once a tax or entitlement is in place, it is all but impossible to get rid of it. For these political dwarfs, it was a cowardly way to impose yet another tax on the people without calling it a “tax on the people.”
The tax of 1.5 cents per ounce which was finally passed in a 13-4 vote by the Philadelphia City Council raised the price of a can of soda to the consumer by 18 cents. If Mayor Kenny had gotten his way, that would have been doubled, as he initially asked for a three cent tax. No doubt, even if you believed that the tax would steer people to healthier beverage choices while funding pre-K and the parks at the same time, the truth of the matter is it was a money grab by the city. Philadelphia already taxed soda at a rate of 8%; with the additional tax, the cost of a 12-pack rose to $8.37. Even if the consumer had a coupon for a free 12-pack, the taxes on it would be $2.16 (12 cans times 12 ounces times 1.5 cents). By administering the tax at a per ounce rate, the city had locked in its share regardless of the sale price of a particular container.
Mayor Kenny continues to use his bully pulpit to claim that the tax on soda has nothing to do with the increase in price at the consumer level, instead blaming the increase on price gouging by the beverage manufacturers. In truth, because of the way in which the tax is administered and applied, the city’s tax has nearly doubled the price of a box of soda syrup sold between the wholesale distributor and the retailer in Philadelphia. This added cost seriously cuts the gross profit margin to about twenty dollars, out of which the distributor has to pay overhead, employees, equipment, and delivery vehicle operation. Understandably, the distributor claims to be unable to “absorb” the tax as the mayor suggested.
Meanwhile, the tax remains in place while Mayor Kenney bemoans the fact that soda industry leaders are unwilling to “reduce their seven figure bonuses.” He has to pin the blame somewhere in view of the tax’s unintended consequences: Consumers haven’t stopped purchasing soda, they’re simply purchasing it outside the city limits. Grocery stores such as Shoprite are seeing a decrease in their overall foot traffic as shoppers fill their carts elsewhere. Because this soda tax has cut their profit margin by 15%, Shoprite will be laying off 300 employees. Similarly, Pepsi recently announced it will be cutting 80 to 100 employees working at distributions centers that serve Philadelphia. Wow. Sounds like this tax really helped the poor, doesn’t it?
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