About a year ago Philadelphia became an early adopter of a 'soda tax.'  Let's take a look at the results and whether you should expect a similar tax coming soon to a city near you.

The Soda Tax

For those of you who aren't dealing with one of these taxes yet locally here is a reminder of what the tax is all about from The Philadelphia Inquirer

The sugary-beverages tax approved by Council adds 1.5 cents per ounce to the cost of most drinks with a sugar-based sweetener or artificial sugar substitute. The tax took effect Jan. 1. Some beverages are exempt, including baby formula; products that contain more than 50 percent milk, fresh fruit, or vegetables; and unsweetened drinks to which the buyer adds sugar, or requests that the seller adds sugar.

The tax is paid by distributors, who are expected to pass the added cost to retailers, who then would typically pass the cost to consumers. City and state sales taxes are applied to the cost of the product, which would include any increase from the sugary-beverages tax.

In the first year the tax has generated $39 million of the expected $46 million, missing the target revenue generation by about 15%, according to CNBC.  A number of studies have been undertaken to look at the effects of the tax.  One study indicates that sales of soft drinks fell 55% within the city limits, and grew 38% just outside the limit.  Analysis by the Inquirer indicates that the results of the study do seem to fall in line with the expectations of the people sponsoring the study.

So far attempts to have courts prevent and revoke the tax has met with no success, legislation to repeal the tax has not moved forward despite 62% disapproval rating on the tax.  In comparison Chicago had a similar tax that lasted about two months before being repealed, but that had higher than a 90% disapproval rating.

The main difference appears to be what the funds are 'intended to do'.  The Chicago area tax goals were reported as vague, while the Philadelphia area tax was strongly marketed as for children's education.  With this example now in place watch for new taxes being introduced in your areas, especially when the funds are marked for a popular cause.

 

 

 

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