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Author Topic: People really hate Philly's new soda tax
Mike Blakesley
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 - posted 01-12-2017 05:52 PM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
I don't think this is a violation of the forum's no-politics rule... if so please take it down, mods. But since it will impact all of our business when it inevitably goes nationwide, it deserves discussion.

People Really, REALLY Hate Philadelphia's New Soda Tax
by Brad Tuttle
Updated: Jan 09, 2017 1:13 PM Mountain

Philadelphia passed a soda tax last June, becoming the first big U.S. city to approve such a measure. So it should have come as no surprise when the resulting tax of 1.5¢ per ounce of sugary beverage went into effect at the start of 2017.

But based on the reaction of many Philadelphia shoppers, plenty of people were either unaware of the new tax or didn't understand exactly how it would work. What appears to have caught many off guard is that the tax applies to far more than just sugar-laden sodas: The tax also hits sugar-free soda, sports drinks, energy drinks, iced tea, lemonade, and even some milks and fancy bottled waters.

Even more alarming to shoppers is how much the tax can add to the bottom line—in some cases hiking the cost of a beverage by more than 50%.

A Philadelphia Inquirer infographic showed exactly how the tax is impacting the price of a wide range of beverages. A 16-ounce Monster Energy drink listed at $2 goes up to $2.24 due to the sugared-beverage tax. A 64-ounce jug of V8 Splash Carrot Orange Juice listed at $2.39 goes up to $3.35. A 20-ounce bottle of Coke Zero—which contains no sugar, but gets affected anyway because diet sodas are also hit with the tax—that used to cost $1.99 is now $2.29.

Because the tax is applied on a per-ounce basis, the price increase on larger items is particularly steep. A 32-ounce Gatorade formerly priced at $1 rises to $1.48 after the new tax is applied. A 128-ounce iced tea listed at $2.50 shoots up to $4.42. And all of that doesn't include normal sales tax of 8%, which also pumps up the final bill.

The list of what is and isn't taxed can be confusing. Basically, all sodas and energy drinks (including diet and sugar-free) are hit with the new tax, as are fruit juices that are less than 50% juice, plus any sports drink, tea, or coffee drink that contains sugar or artificial sweeteners. Plain old bottled water and fruit juices that are more than 50% pure juice are exempt—but products such as Vitamin Water and almond milk, which have sweeteners, are taxed just like Mountain Dew or Dr. Pepper.

The Tax Foundation noted that as a result of the new tax, beer can now be cheaper than soda or energy drinks in Philadelphia. The sugared-beverage tax is 24 times higher than the tax applied to beer sales—and after all taxes are added in, a 12-pack of Propel energy drink costs more than a 12-pack of Icehouse beer. "Before sales taxes, 12 Propels is $5.99 plus $3.04 in soda taxes for a total of $9.03 (and that's when it's on sale for $1 less than the $6.99 standard). The 12 Icehouses are $7.99, beer tax included," the Tax Foundation explained.

Understandably, shoppers haven't been happy to see that their normal beverage purchases suddenly cost an extra 25%, 50%, or more. One 7-Eleven employee in Philadelphia said she was "yelled at all day" by angry customers on the first day the tax went into effect. People have taken to social media to gripe as well.

Some have noted that the sugared-beverage tax could hurt Philadelphia businesses, because circumventing the tax is as simple as hitting a supermarket or convenience store just outside the city limits.

Many others have said that they'd cut back on soda purchases altogether—which, after all, is partly what motivated the law in the first place. The new tax was sold as an easy way to raise $91 million annually for city schools and public spaces. But Philadelphia also became the first major city to pass such a tax because proponents hoped to improve the health of citizens. Studies show that nearly 70% of kids are overweight or obese in North Philly, and the city as a whole has the second-highest rate of obesity among the country's biggest metropolitan areas. Article

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Rick Raskin
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I suppose theaters goers will have to fork over even more to fill up. That'll go over well. [evil]

Welcome to the 'city of brotherly love'.

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Leo Enticknap
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quote: article
But based on the reaction of many Philadelphia shoppers, plenty of people were either unaware of the new tax or didn't understand exactly how it would work.
Exactly, precisely, the same thing has happened here with CA's plastic bag tax. A ballot proposition passed in November, to the effect that supermarkets can now no longer give away carrier bags with your shopping: the only ones they can provide are "reusable" ones (a bad joke: try reusing a TJ's brown paper bag after it's had any significant weight in it, and you'll wish you hadn't), and they have to charge a minimum of ten cents per bag.

Two days after this came in, a checkout girl at my local Trader Joe's told me that she'd been reduced to tears by the amount of abuse she'd received as a result of being on the sharp end of that.

It's funny how tax measures that relieve you of a serious amount of money, but in a hidden or less obvious way (e.g. a sales tax hike) annoy and polarize people a lot more than a trivial amount, but levied in a very clear and open way (e.g. you pay 30 cents for some carrier bags, or have no way of getting your shopping to the car).

Gordon Brown understood this in Britain in the late '90s, hence his political opponents invented the phrase "stealth tax" to describe the very clever methods he used to separate his compatriots from an impressive amount of their money in a boiling-the-frog sort of way. The soda and carrier bag taxes are about as unstealthy as you can get, and will probably end up biting the politicians who championed them in the rear; even though the amount of money we're talking about is tiny compared to other taxes that receive almost no complaints or attention.

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Bobby Henderson
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That soda tax is just plain stupid. It's an overly simplistic "solution" for a very complicated problem. I don't see it having any positive effect on obesity and other health problems in the Philadelphia area. The people who drafted the legislation obviously didn't have much legitimate input from medical and nutritional experts.

Regular soft drinks like Coca-Cola are bad for you. The big offender is high fructose corn syrup. But that goop is widely used in many different kinds of food products, not just soft drinks. It's even in a bunch of breads.

The artificial sweetners in diet sodas aren't good either, but at least those kinds of drinks aren't going to spike the insulin levels in your blood stream and add to your waistline. By the way, there's nothing natural about High Fructose Corn Syrup either. Just as many strange chemicals are used to create that crap.

I really don't get this law lumping in drinks that are sweetened with natural sugars, such as sports drinks like Gatorade. Naturally sweetened sports drinks are actually a good thing to drink during or after a work out. They're probably not so good to drink for someone that never gets off his ass all day. Chair potato at work and couch potato at home. Consumers do have to read labels carefully. There are plenty of fruit juices, teas, energy drinks and sports drinks that are loaded with high fructose corn syrup.

I have no problem with "sin" taxes on cigarettes or alcohol. Abuse of either one leads to serious health problems and the latter can be a risk to public safety (drunk driving, violence toward others, etc.). Obesity, heart disease, adult onset diabetes, etc. are problems mostly related to overall diet and lack of physical activity. The consequences of those diseases are creating a huge burden to taxpayers, medical service providers, insurance companies and it's making the cost of health care continue to spiral upward like it has for over 20 years. Making any meaningful progress on the nation's obesity epidemic is going to take a lot more than just making people drink a little less Coca-Cola.

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Leo Enticknap
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quote: Bobby Henderson
egular soft drinks like Coca-Cola are bad for you. The big offender is high fructose corn syrup.
Hence the reason I only drink Mexican Coke. It's still pretty bad for you, but at least it doesn't have that in it.

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Martin McCaffery
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Of course, if they saw how much of the price of hard liquor, or "spirits" in most States (on top of the Federal tax) they'd consider themselves lucky. Admittedly, one doesn't (or shouldn't) drink liquor in the same quantities as soda, but a "sin tax" is a "sin tax" no matter the "sin"

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Jim Cassedy
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It wasn't clear to me from the story (unless I missed it) - -
Was the soda tax something that was voted into existence by
the public, like the plastic bag tax Leo mentioned here in CA?
Or was it just something "forced" onto taxpayers by the city government?

- - and whats to stop me from going into a Starbucks and buying a cup
of black coffee or plain tea, and then putting 15 spoonfuls of sugar in it?

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Jonathan M. Crist
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The Philadelphia soda tax was something that mayor Jim Kenney got his city council to pass by ordinance. It was not voted on by the public in any referendum.

The soda tax monies are supposed to be earmarked for early childhood education programs but I don't know of any rational person that seriously believes that. The City of Philadelphia has been desperate for tax dollars and has already enacted a recent series of additional revenue measures on top of Philly's local income tax. For example a couple of years ago Philadelphia lobbied the PA legislature and was given special permission to add an additional 2% sales tax on top of the regular Pennsylvania statewide 6% percent sales tax .... so that sales tax in Philly is now 8% of any purchase price. And just to be clear ..... the Philadelphia Soda Tax of 1.5 cents per ounce is in addition to the already existing 8% sales tax on that same soda purchase. [By was of example: If a two liter bottle of soda is $1.00 then there is an additional .08 of sales tax PLUS another $1.02 of soda tax for a total price of $2.10. 2 liters =67.628 ounces x 1.5 cents per ounce equals $1.02.]

[And last year Philly again lobbied the state and was given permission by the state legislature to add an additional $2.00 per pack on cigarettes on top of the Pennsylvania's statewide cigarette tax of $2.60 per pack. A total of $4.60 per pack in cigarette taxes in Philly.]

Perhaps the most onerous provision of the Philly Soda Tax is how it is calculated in the case of fountain drinks. If you serve a 64 ounce cup which is half ice and half soda, the tax is based on 64 ounces regardless of how much soda is actually in the cup.

Personally I want to know how they are going to collect the tax from children's front yard lemmonade stands since that lemonade is a 'sugary beverage' as defined by the Philly ordinance. [Big Grin]

And for those of you who may think that could not possibly be coming to your area .... in addition to Berkley California, Philly and Chicago the tax was on the ballot in 4 other places this past November 2016 (in San Francisco, Oakland and Albany California along with an excise tax on soda distributors in Boulder Colorado) See: 4 Cities Pass Soda Tax Effective Jan 1, 2017

And it will continue. Politicians of both parties are desperate to raise revenues without raising income or sales taxes.

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Lyle Romer
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Perhaps they should create a video game tax also. Kids playing video games instead of running around outside like they used to contributes to childhood obesity.

Even if you believe that obesity is as bad as smoking and needs to be solved, taxes like this will do almost nothing. Anybody that regularly travels outside Philly will just buy their "sugary drinks" outside of the city and avoid the tax.

98% of the rest of people will just buy it anyway, bitch about the tax and then re-elect the same council members that passed it.

These taxes are just like red light cameras. They are revenue sources disguised as something to benefit the public at large. Heck, a large part of why Marijuana keeps getting pseudo legal is that the states are losing revenue from less people smoking cigarettes and they can tax it.

To protect the public from these schemes, States need to pass laws at the State level that defines what can and can not be taxed by any municipality. That way, things like soda taxes would take a 2 step process of the state legislature and governor approving the ability to tax in the first place and then the municipality having to pass the tax.

Will they remove this tax when it is shown that the obesity rates in Philadelphia don't change after 2 or 3 years. I think not!

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Scott Norwood
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quote: Jonathan M. Crist
The soda tax monies are supposed to be earmarked for early childhood education programs but I don't know of any rational person that seriously believes that.
This sounds a bit like what happened in Virginia with lottery funds. Virginia law requires that 100% of revenues from the state lottery be used for the benefit of public schools. On the surface, this sounds like a good idea, since few citizens are likely to oppose a program that provides money to schools. What has happened is that all lottery revenues do indeed go to public schools, but the amount of money in the state's general fund that is designated for public schools has been reduced by a commensurate amount. The result is, of course, that schools have no additional money, but that the general fund has increased significantly.

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Leo Enticknap
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quote: Lyle Romer
Anybody that regularly travels outside Philly will just buy their "sugary drinks" outside of the city and avoid the tax.
Given just how high the tax is (I didn't realize that it doubled the price of a beverage until reading Jonathan's post), absolutely. Sin taxes only work long term if they are high enough either to raise a decent amount of money or deter the "sinful" behavior in question (if you really believe that the latter is the reason for having them), but not high enough to promote evasion.

In England in the mid '80s there was a big hike in the booze tax (which had not much to do with alcohol abuse and a lot to do with red ink on Her Majesty's bottom line), as a result of which there was a home wine and beer making craze that lasted for around 5-7 years or so. The tax was only on actual alcoholic beverages, not the stuff you need to make them yourself. During that time supermarkets sold kits containing everything you needed, plus the paraphernalia and consumables individually. People quickly discovered that to produce a drink that didn't take a long time to make and tasted gross and disgusting actually took quite a quite a lot of skill and commitment, and so when the tax started creeping down again through several years of raising it below CPI, the home booze making fad petered out. But it was a demonstration of what happens if you push people too far with sin taxes.

Maybe we'll see a reboot of The Dukes of Hazzard in which Uncle Jesse makes bootleg Sprite?

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Bobby Henderson
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quote: Scott Norwood
This sounds a bit like what happened in Virginia with lottery funds. Virginia law requires that 100% of revenues from the state lottery be used for the benefit of public schools. On the surface, this sounds like a good idea, since few citizens are likely to oppose a program that provides money to schools. What has happened is that all lottery revenues do indeed go to public schools, but the amount of money in the state's general fund that is designated for public schools has been reduced by a commensurate amount. The result is, of course, that schools have no additional money, but that the general fund has increased significantly.
The same kind of nonsense happened with lottery funds here in Oklahoma. The public schools system in this state is reeling, thanks to policy makers handing out tax cuts as candy to pander to voters. Then oil prices tanked, causing a huge amount of state funding to suddenly disappear.

Meanwhile brick and mortar retail across the United States is struggling badly. A big part of that problem is sales tax. Retailers with a local presence and physical store front have to collect it on every purchase. But many online merchants do not. For a bigger ticket item like an HDTV set, computer system, DSLR, etc. the difference on sales tax can add up to hundreds of dollars. That big price difference on tax alone has increased in many cities and towns. Many have passed measures to help fund infrastructure projects or pay police or teachers more competitively. If you're paying upwards of 10¢ worth of sales tax on each $1 spent it's very tempting to just order the item from Amazon and save all that money from sales tax.

Here in Lawton the Kmart store that had been here since before I was born closed down in December. The Sears location in Central Mall is closing at the end of March. It's looking like the entire Sears-Kmart business could fold before the end of 2017. Hastings Books, Music and Video went out of business, so we're down to just one video rental store left (Family Video) in a city of 100,000 people. In the 1990's we had at least a dozen or so video rental stores. Our mall no longer has any music stores or book stores; we're stuck with whatever is on the shelves at Walmart or Target. I expect even more retailers to go bust as long as this issue with sales tax continues to go un-addressed.

Amazon claims they want to add 100,000 jobs. What kind of jobs and where? For a company that is so huge on automation and has nothing in terms of retail store fronts I can't help but be suspicious that 100,000 jobs headline is bullshit. One thing is certain: I don't make my living designing signs for online companies. My business depends on companies that have a store front.

Philadelphia's soda tax is priced high enough that I can easily imagine people driving their SUVs out of town to load up on soft drinks, bottled water, etc. at some suburban grocery store not subject to the tax. The gasoline money would be more than offset by savings from dodging the high soda tax.

It appears to be ever more difficult to implement a clear, fair yet uncompromising tax system. Nothing in our way of life is free. Our streets, highways, water systems, sewage systems, garbage removal systems, police, fire departments, public schools, etc. all cost a lot of money to staff and maintain. We all have to pay for it with money. Waving a flag on the front porch doesn't pay any bills.

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Leo Enticknap
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My $0.02 on this is that the founding fathers simply didn't see online retailing coming, or anything like it, and therefore the interstate commerce provisions of the Constitution simply don't enable anything like a fair taxation system to be applied to business that is done by a combination of the Internet (which fundamentally doesn't even recognize national borders, let alone state, county or city ones) and freight shipping.

This is especially true if you have two adjoining states, one of which has a very high sales tax and the other none. Half of northern California makes short drives across the border into Oregon (zero sales tax) to buy small, portable, high value items, and that's completely legal.

IMHO this is a slightly different issue from sin taxation, which, theoretically at least, is not done just to raise revenue for the public purse. Sin taxation doesn't work on its own and never will: the public need convincing that an activity is actually sinful before any public acceptance of curtailing it is going to happen. With tobacco that took half a century: the first research that showed a clear link between tobacco and cancer was done by the Nazis in the late 1930s, but you didn't start to see smoking banned in many public places until the 1980s.

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Rick Raskin
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I wonder how long it will be before a national value added tax (VAT) is implemented in the US. It seems that with states inability to tax online transactions and the decline in brick and mortar stores, there has to be a way to make up for lost taxation revenue. It would not be difficult to determine each state's portion of VAT funds. Another option is to call the VAT a national sales tax and eliminate local sales taxes altogether.

To all of the comments before, I totally agree that sin tax is ridiculous. Scott's comments about the Virginia Lottery are on point. It is illegal to earmark a tax in Virginia so all funds had to go into the general fund the results being as Scott mentioned. The voters were never told how the funds would be allocated, only that they were funding education.

I my area, the city of Manassas has a 4% meals tax on top of 6% sales tax. Its no wonder that most restaurants are located outside the city limits.

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Mike Blakesley
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quote: Jonathan M. Crist
The Philadelphia soda tax was something that mayor Jim Kenney got his city council to pass by ordinance. It was not voted on by the public in any referendum.
That's probably the only way it would have ever passed. If it was put to a vote it'd get voted down. Maybe some future council member will revoke it, if it stays unpopular enough.

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