MauledAgain

For almost ten years I have been commenting on the Philadelphia soda tax, from when it was a proposal, through its enactment, and during its rocky track record, as it has failed to raise the predicted revenue and has met legal challenges from opponents. I have shared my thoughts in posts such as What Sort of Tax?, The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, Soda Sales Shifting?, Taxes, Consumption, Soda, and Obesity, Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit?, Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, What Gets Taxed If the Goal Is Health Improvement?, The Russian Sugar and Fat Tax Proposal: Smarter, More Sensible, or Just a Need for More Revenue, Soda Tax Debate Bubbles Up, Can Mischaracterizing an Undesired Tax Backfire?, The Soda Tax Flaw in Automotive Terms, Taxing the Container Instead of the Sugary Beverage: Looking for Revenue in All the Wrong Places, Bait-and-Switch “Sugary Beverage Tax” Tactics, How Unsweet a Tax, When Tax Is Bizarre: Milk Becomes Soda, Gambling With Tax Revenue, Updating Two Tax Cases, When Tax Revenues Are Better Than Expected But Less Than Required, The Imperfections of the Philadelphia Soda Tax, and When Tax Revenues Continue to Be Less Than Required.

Within a 24-hour period, two developments concerning the Philadelphia soda tax surfaced. One brought bad news to the supporters of the tax, and the other brought good news.

First, news broke that the city planned to lower its estimate for soda tax revenue for the fiscal year. In an announcement that surprised no one, except perhaps the die-hards who claimed that revenues would surge in time to offset the previous shortfalls, the city finally admitted that it would not meet its $46.2 million projection for the fiscal year ending at the end of this month. Why? Through the end of April, only $25.6 million had been raised, and the likelihood of raising more than $10 million in each of May and June was pretty much zero. That conclusion reflects reality, considering that in its best month, the tax generated $7 million, short of the average monthly amount required to meet the city’s revenue projection. Yet, stubborn optimists that they are, city officials decided not to reduce its estimate for soda tax revenues during the fiscal year ending June 30, 2018. Why? A spokesperson explained that the tax has been around for only four months and that the city continues to be “working out the kinks.” It would be enlightening to know what those kinks are, and how “working [them] out” would double the revenue from the tax. Perhaps a travel ban on people leaving the city to make their purchases elsewhere? In the meantime, the City Controller, pointing out an issue I previously raised, suggested that the shortfall in soda tax revenue presented the very real possibility of a “multimillion-dollar burden” for taxpayers. Why? The city has committed to spending money that it anticipated receiving but that hasn’t been flowing into its coffers.

Second, the following day, as reported in this story, Pennsylvania Commonwealth Court upheld a lower court decision that rejected arguments against the legality of the tax. Opponents of the tax plan to appeal. In a split decision, Commonwealth Court concluded that the tax was not a double sales tax even though the burden of both the sales tax and the soda tax fell on the retail purchaser. In its opinion, the court explained that the tax “is not imposed on the ownership of the sugar-sweetened beverages or on their sale; rather, it is only imposed if the beverages are supplied, acquired, delivered, or transported for purposes of holding them out for retail sale in the city.” Does that not appear to be a conclusion that the tax is an inventory or property tax? Commonwealth Court, however, concluded that the tax is not a duplicative property tax violating the state Constitution’s uniformity clause because it is a fixed amount per ounce rather than a percentage of the beverage value, and because the tax is “imposed only when the supply, acquisition, delivery or transport is for the purpose of the dealer’s holding out for retail sale within the City the sugar-sweetened beverage or any beverage produced therefrom.” Is that an inventory tax? If so, is Philadelphia authorized to enact an inventory tax? The court did not address those questions because they had not been raised.

The city’s victory in Commonwealth Court not only is temporary, considering the possibility of reversal by the state Supreme Court, but also is pyrrhic. The city, anticipating Supreme Court affirmance, sees a clear path to collection of a tax that is bringing in far less revenue that the city has committed to spending. That leaves the city with three choices, namely, cut back on those programs, cut back on city services, or enact or increase another tax. Prevailing in a legal battle over a pragmatically failed tax won’t make selecting one or more of those three choices a reason to rejoice.

So Philadelphia now has a so-called “soda tax, though legal challenges could postpone or eradicate the enactment. And, as I pointed out in Bait-and-Switch “Sugary Beverage Tax” Tactics, the tax applies to products other than soda, and although justified as an anti-sugar-consumption measure, doesn’t touch most sugar-containing items. Worse, it is imposed on products that do not contain sugar. I have explained these flaws in What Sort of Tax?, The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, Soda Sales Shifting?, Taxes, Consumption, Soda, and Obesity, Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit?, Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, What Gets Taxed If the Goal Is Health Improvement?, The Russian Sugar and Fat Tax Proposal: Smarter, More Sensible, or Just a Need for More Revenue, Soda Tax Debate Bubbles Up, Can Mischaracterizing an Undesired Tax Backfire?, The Soda Tax Flaw in Automotive Terms, Taxing the Container Instead of the Sugary Beverage: Looking for Revenue in All the Wrong Places, and Bait-and-Switch “Sugary Beverage Tax” Tactics.

Yet this tax contains within its provisions a road-map for evasion. Aside from the obvious tactic of purchasing items outside the city, the wholesalers and distributors who are responsible for paying the tax have been presented with an avoidance mechanism. As explained in the city’s summary, the tax does not apply to “[u]nsweetened drinks that the purchaser or seller can add sugar to at the point of sale.” Aside from being another example of the hypocrisy of the justification for the tax, this exemption provides a pathway for escaping the tax. Though it won’t work for all of the taxed items, it will work for many of them.

Here is an example of what distributors could do, if they conclude that the cost of implementing this approach is worth it. It might not be cost effective at the moment, but if other cities and localities follow Philadelphia and the “soda tax” becomes a national phenomenon, this avoidance technique probably will get close scrutiny by the manufacturers and distributors. Beverages that are sold in bottle could be sold in unsweetened form, just as coffee is sold in unsweetened form. The beverage would thus not be subject to the tax no matter where it is sold or consumed, because the tax does not apply to unsweetened beverages. Purchasers could then add their own sweetener, re-cap the bottle, shake it, and find themselves with a sweetened drink. In fact, purchasers could adjust the amount of sweetener that they add, satisfying their own preferences, and ending up with a beverage that is sweeter or less sweet than what was originally being sold. Of course, this won’t work well with beverages that are sold in cans under pressure, such as soda, and might not work with soda sold in bottles. The shaking of those bottles after adding a sweetener to unsweetened soda probably would make a mess.

Eventually, the jurisdiction imposing the tax would realize that a sugar tax doesn’t work when applied to sweetened beverages, because actual revenues would be far less than those anticipated. Jurisdictions would then attempt to tax sales of sugar at wholesale and retail levels, which would spread the incidence of the tax over so many items that its impact would be different and perhaps less noticeable. At the same time, extending the tax to non-sugar sweeteners would be such an obvious revelation of the hypocrisy behind the claim that the tax is health beneficial because it encourages the reduction of sugar consumption that attempts to tax items containing non-sugar sweeteners would fail.

If that is the eventual outcome, it is disappointing to see politicians learning by making a mess of things instead of sitting down and using their intellectual skills to figure out in advance that the sort of tax enacted by Philadelphia is a product of emotions and not rational thought, afflicted by politics. What a bitter way for the people of Philadelphia to learn that they’ve been the target of a bait-and-switch game that so easily can backfire.

Philadelphia revenue officials are in the process of generating rules and regulations specifying in detail how the city’s new soda tax will be implemented, including not only procedural and filing issues but also the scope of the tax. The tax, of course, is flawed. It is mis-named, because it applies to more than soda. It reaches products that do not contain sugar. Though touted as a way to reduce sugar consumption, there are hundreds of sugar-containing items that escape the tax. I have explained these flaws in What Sort of Tax?, The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, Soda Sales Shifting?, Taxes, Consumption, Soda, and Obesity, Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit?, Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, What Gets Taxed If the Goal Is Health Improvement?, The Russian Sugar and Fat Tax Proposal: Smarter, More Sensible, or Just a Need for More Revenue, Soda Tax Debate Bubbles Up, Can Mischaracterizing an Undesired Tax Backfire?, The Soda Tax Flaw in Automotive Terms, Taxing the Container Instead of the Sugary Beverage: Looking for Revenue in All the Wrong Places, Bait-and-Switch “Sugary Beverage Tax” Tactics, and How Unsweet a Tax.

Despite all the attention I have paid to the soda tax issues, I discovered a few days ago that it is even worse than I had realized. In a Letter to the Editor of the Philadelphia Inquirer, Michelle Pauls alerted readers to a startling development. Apparently the “soda” tax will be imposed on sales of almond milk, rice milk, and cashew milk. These “milks,” though not from a cow, goat, or other mammal, are derived from plants and are consumed not only by people who prefer them, but also by individuals who cannot digest, or who are otherwise adversely affecting from drinking, cow or other mammal milk. Pauls notes that the “Physicians Committee for Responsible Medicine cite research that ‘approximately 70 percent of African Americans, 90 percent of Asian Americans, 53 percent of Mexican Americans, and 74 percent of Native Americans were lactose intolerant.’” Lactose intolerance also affects substantial numbers of people with Italian, Greek, Jewish, and other ancestry from Mediterranean areas.

So what would be the justification for taxing plant-based milk but not mammal-based milk? It’s not the sugar content, because all these milks contain sugar. It’s not for health promotion purposes, despite the alleged justification for the soda tax, because all these milks are healthy. It’s not that they are beverages, because there are beverages not subject to the tax. So what is it? Could it be ignorance of what these milks are? Could it simply be revenue maximization? If it’s the former, it’s not all that difficult to become informed. If revenue maximization is the concern, then why not tax all sugar-containing products? Why let donuts, cookies, pies, and cakes off the hook?

It remains to be seen what will happen. I hope that wisdom and common sense prevail.

As soda taxes gained voter approval in four cities earlier this month, Philadelphia continues to encounter challenges in its attempt to implement its version of the tax. Unlike those four cities, Philadelphia faces questions of state constitutional authority that have yet to be resolved because they are the subject of pending litigation.

The soda tax is deeply flawed. As I have pointed out in What Sort of Tax?, The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, Soda Sales Shifting?, Taxes, Consumption, Soda, and Obesity, Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit?, Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, What Gets Taxed If the Goal Is Health Improvement?, The Russian Sugar and Fat Tax Proposal: Smarter, More Sensible, or Just a Need for More Revenue, Soda Tax Debate Bubbles Up, Can Mischaracterizing an Undesired Tax Backfire?, The Soda Tax Flaw in Automotive Terms, Taxing the Container Instead of the Sugary Beverage: Looking for Revenue in All the Wrong Places, Bait-and-Switch “Sugary Beverage Tax” Tactics, How Unsweet a Tax, and When Tax Is Bizarre: Milk Becomes Soda, the tax is both too narrow and too broad. Though touted as a health improvement incentive, despite being attractive to politicians because of its revenue possibilities, it reaches items that are healthy and fails to reach all sorts of items that contribute to poor health. Taxing almond milk but not doughnuts belies the claim that the soda tax is designed to, and will improve, health.

Now comes news that despite the pending court challenges claiming that Philadelphia lacks the authority to enact the tax, the city is spending the revenue that it anticipates collecting. Reports are that Philadelphia has spent almost $12 million on a pre-K program, and $1.5 million on expansion of a community schools plan. The pre-K program is planned to begin on January 1, the same day that the tax goes into effect. The judge hearing the case has promised a decision by January 1. What happens if the judge rules that the city exceeded its authority? What happens if the judge holds in favor of the city but appeals are taken? What happens if eventually there is no soda tax revenue? Which existing programs are cut by $13.5 million to make up for the money that has been spent despite the uncertainties surrounding collection of the tax? The $13.5 million probably grow to a larger amount, because there is no reason to think that spending on the program will stop during December. And what happens to the children who have been enrolled in the program, and their families? Will they have time to make alternate plans?

To these questions, the answers are not forthcoming from Philadelphia officials, who refuse to comment on their contingency plans, assuming they have any, to deal with an adverse judicial decision. The only comment is that “As of today, the city has no existing streams of revenue to replace the anticipated funding.” No kidding.

The city signed a contract with an academy that operates pre-K programs, and the contract includes a clause making additional funding contingent on the soda tax revenue. The academy is renovating one of its classrooms and has hired four teachers to handle the expected enrollment increase. What happens if the revenue doesn’t materialize? The academy’s CEO explains, “If some sort of repeal was to occur, I think it would be devastating.” No kidding.

It is one thing to enact a tax and spend anticipated revenues before the tax goes into effect. It’s another thing to enact a tax that everyone knows will be challenged and that is, in fact, challenged and to spend anticipated revenues before the authority for enacting the tax has been confirmed. It’s reckless. If the tax is struck down, someone is going to pay. As usual, it won’t be the officials who made the gamble. It will be the people whose jobs are terminated, whose programs are cut, whose services are diminished, whose lives are disrupted.

It would have made more sense to delay the pre-K program until the beginning of the next academic year, in September. By then, the status of the tax would be known, and if it were upheld, eight months of revenue would have been collected and available for starting up the program. But it’s so easy to gamble with other people’s money.

No tax is perfect. By definition, a tax takes money or property from people, theoretically, at least, in return for goods or services. Because it is impossible to measure the precise value of goods and services provided to each taxpayer, the amount of tax collected from someone is unlikely to match exactly what the person has received. User fees also suffer from the same imprecision, though some, such as a sewer fee based on water use, can come very close.

But some taxes are so far from perfect that they need to be classified as counterproductive. This characterization surely describes the Philadelphia soda tax, which I have criticized consistently since it was first proposed. Touted as a mechanism to reduce sugar consumption, it fails to reach most sources of sugar consumption and yet applies to healthy items. Those interested in my explanation of the serious flaws in the Philadelphia soda tax can take a look at What Sort of Tax?, The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, Soda Sales Shifting?, Taxes, Consumption, Soda, and Obesity, Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit?, Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, What Gets Taxed If the Goal Is Health Improvement?, The Russian Sugar and Fat Tax Proposal: Smarter, More Sensible, or Just a Need for More Revenue, Soda Tax Debate Bubbles Up, Can Mischaracterizing an Undesired Tax Backfire?, The Soda Tax Flaw in Automotive Terms, Taxing the Container Instead of the Sugary Beverage: Looking for Revenue in All the Wrong Places, Bait-and-Switch “Sugary Beverage Tax” Tactics, How Unsweet a Tax, When Tax Is Bizarre: Milk Becomes Soda, Gambling With Tax Revenue, Updating Two Tax Cases, and When Tax Revenues Are Better Than Expected But Less Than Required.

Now comes news that Pepsi plans to lay off as many as 100 employees at three distribution plants that provide beverages to Philadelphia wholesalers and retailers. Pepsi revealed that its sales in the city have dropped by 40 percent. The city administration criticized the announcement, drawing attention to the pre-kindergarten program funded in part by the tax, which it claims created 251 new jobs. Of course, that’s no solace to Pepsi workers who lose their jobs, as they probably aren’t qualified to teach youngsters. A city spokeswoman claimed that Pepsi profits are sufficient to avoid the layoffs, and that the layoffs probably aren’t a consequence of the tax. What the city has overlooked is that the distribution plants are independent businesses which measure profit and loss separately from Pepsi itself.

Pepsi is not the only company slashing jobs. Canada Dry Delaware Valley announced it would lay off three dozen employees. An owner of six ShopRite stores has cut employee hours and may end up cutting 300 jobs. In a this commentary, Dom Giordano explains that some of the jobs being cut are held by individuals who are in second-chance programs after serving sentences for committing crimes.

One aspect of this news is puzzling. If reports are true that Philadelphians are making their beverage purchases in the suburbs, would not the suburban retailers need more inventory? Do the regional distributors have the ability to deliver to the suburban retailers the soda they no longer sell in Philadelphia? Or is it a matter of having the suburban truck and driver deliver more soda while mothballing the city truck and laying off the city driver? It would be most helpful if the beverage wholesalers provided additional information.

Another question comes to mind. How would things have turned out if the tax were an “unhealthy food” tax coupled with a “healthy food rebate”? Dom Giordano mentions that he ran out of orange juice and did without until he made his suburban shopping trip. Why is orange juice being taxed as though it were soda? Orange juice is a good source of vitamin C, and is a far better complement to breakfast than donuts, Danish pastry and, yes, this will generate howls of protest, bacon.

Of course, a tax on unhealthy foods isn’t perfect, even if very precisely designed. It would make sense for its revenues to be used in part to subsidize, through rebates or some other system, the cost of healthy food. It would make sense for its revenues to be used in part to pay for the increased costs of healthcare caused by the ingestion of unhealthy food and beverages. It would make sense for its revenues to fund courses throughout the K-12 system and in adult night schools that give people the opportunity to learn about unhealthy eating and drinking, to learn about the connection between unhealthy diets and healthcare costs, and to learn how to change their habits.

It’s unwise to continue on the path of taxes that aren’t sufficiently connected to the use of their revenues. It makes sense to use fuel taxes to fund highway repairs. It does not make sense to impose a tax on hair and nail salons to fund playgrounds and swimming pools. Just because a funding goal is worthy, such as expanded pre-kindergarten education, is no reason to justify a tax on an unrelated transaction or status.

Some members of Philadelphia’s City Council who are opposed to the sugary beverage tax proposed by the mayor have offered an alternative. The Non-Reusable Beverage Container Tax would apply to non-reusable beverage containers supplied to, acquired by or delivered to retailers. A non-reusable beverage container is any individual, separate, and sealed glass, metal, or plastic bottle, can, jar, or carton, not ordinarily collected from consumer for refilling, that contains a beverage of more than seven fluid ounces and that is intended for consumption off premises. A beverage is any soft drink, water, ready-to-drink tea or coffee, fruit juice, vegetable juice, or energy drink, but not baby formula, products with milk as the primary ingredient, and milk substitutes. The preceding summary does not do justice to the complexity of the proposal, particularly the collection and procedural requirements.

In terms of how I analyze taxes and user fees, the beverage container tax fares no better than does the soda tax. I have analyzed the latter in numerous commentaries, beginning with
What Sort of Tax?, and continuing through The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, Soda Sales Shifting?, Taxes, Consumption, Soda, and Obesity, Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit?, Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, What Gets Taxed If the Goal Is Health Improvement?, The Russian Sugar and Fat Tax Proposal: Smarter, More Sensible, or Just a Need for More Revenue, Soda Tax Debate Bubbles Up, Can Mischaracterizing an Undesired Tax Backfire?, and The Soda Tax Flaw in Automotive Terms.

So what’s the justification for the beverage container tax? According to this report, the member of City Council introducing the bill stated, “This tax needs to be shared by all, from soda to Perrier.” Of course, the beverage container tax does not ensure that the revenue burden is shared by all. Some people will have the ability to purchase beverages outside the city, whereas others do not have that opportunity. The flat 15-cents-per-container tax is regressive, because a person who purchases beverages 500 times during the year would pay $75, which might not be much for a wealthy or economically comfortable individual but which would be a big dent in the wallet of a poor person.

Just as the soda tax has no rational connection to the programs its revenues are intended to finance, so, too, there is no rational connection between a beverage container tax and the programs its revenues are intended to finance. As a practical matter, both tax proposals are designed to finance the same bundle of programs. It’s not that those programs are bad ideas. It’s the lack of a rational funding connection that underscores the flawed nature of both proposals.

The soda tax is designed to cut sugar consumption. But it fails to reach its intended target because it does not apply to most sources of sugar. It’s unclear what the beverage container is intended to target other than containers as containers. Perhaps some sort of justification could be offered in terms of reducing the proliferation of containers filling landfills, polluting the ocean, and contributing to street trash. However, the nature of such an argument as pure pretext would be obvious because the proposed beverage container tax would not apply to most sources of detrimental containers. Worse, it would apply to containers that are recycled, even though those containers create far fewer environmental disadvantages than do containers that are not recycled. Even worse, it would not apply to those styrofoam containers used to deliver food and other items. Inexplicably, it would apply to container filled with beverages intended for off-premise consumption but not containers filled with beverages intended for on-premises consumption, even though both containers contributes to pollution and landfill overflow if they are not recycled.

The beverage container tax is nothing more than the soda tax expanded to cover other beverages, some healthy and some not-so-healthy. Designed in that way, the tax no longer can be justified as a means of reducing sugar consumption. It cannot be justified as environmentally sensible. It’s nothing more than a matter of looking for revenue in all the wrong places.

Some tax issues don’t get widespread attention because they’re too technical or deal with obscure transactions, but the proposed Philadelphia soda tax has been the talk of the town. On Thursday, as reported in this Philadelphia Inquirer article, City Council passed a budget that omitted the mayor’s proposed tax on soda and other beverages containing sugar. According to the article, similar proposals failed to pass in Baltimore, Washington, and New York State, though I’ve been told by readers that similar taxes do exist here and there throughout the country. It’s a controversial tax, and one on which I shared my thoughts most recently in Yes for The Proposed User Fee, No for the Proposed Tax. My op-ed piece on the issue, Why Phila. Soda Tax Already Has Gone Flat, was published in the Philadelphia Inquirer on March 24 of this year. It amuses me when supporters of the tax claim that the opposition comes from the “big soda lobby” because I do not own a soda company, I do not own stock in a soda company, I do not sell soda, and I do not drink soda. My opposition to the tax rests on a variety of principles, but there’s one that stands out.

Aside from the legal issues, aside from the difficulties of implementing the tax, aside from the cost to retailers of collecting the tax, aside from the cost to the city of enforcing the tax, aside from the ease with which the tax can be avoided, one huge question looms over the debate. Why single out beverages? Every justification that is given for taxing sugary beverages applies equally, if not more thoroughly, to other items. Donuts, for example, not only contain sugar, but contain fats. Hard candy is nothing more than condensed sugar. Cookies contain sugar, carbohydrates, transfats, lard, and all other sorts of things that do as much damage to a person’s health if ingested in unreasonable quantities. The supporters of the soda tax, though correct in pointing out that soda contributes to obesity, act and speak as though nothing else contributes to a person’s being overweight. There are far more than enough obese people who do not drink sugary drinks. A user fee, reflecting the cost to society of overindulgence in unhealthy foods, would be much more appealing if it applied to everything that was harmful to a person’s well-being. Spread over all unhealthy foods, a user fee could raise the same amount of revenue as would the mayor’s proposed soda tax without through a very low per-item assessment, unlike the significant increase in the prices of certain beverages that the soda tax would generate. Even a user fee on oversized portions might make sense, although that would punish people who save half of the gargantuan meal for the next day.

City Council’s decision to leave the soda tax out of the budget has not deterred supporters of the soda tax. The mayor explains that he is not “done fighting” and observers suggest that it will be re-proposed by the end of next month. In the meantime, even though Council passed a balanced budget, according to this Philadelphia Inquirer story, the mayor claims he will need to cut several fire companies, chop a day from library opening hours, and eliminate two classes at the police academy. Why? To increase the reserve fund. Reserve funds are important, and there’s much to be said about building them up during times of plenty, to insure against times of need, but is this a good time to be collecting more in revenue than is being spent? Yet, in another explanation, the mayor claims that the cuts are needed because of cash flow problems, that is, the timing of the inflow and outflow of tax receipts and expenditures. As it is, the budget passed by Council will allow for reserves, so Council and the Mayor are at odds over the size of the reserve. Are the mayor’s threats simply bargaining chips, considering how his planned cuts affect three city services that affect everyone, namely, police, fire, and libraries? No one in city government seems to mention how much can be saved by ditching those patronage jobs at the BRT, or elsewhere. Why?

The Philadelphia soda tax remains controversial, and hasn’t started off very well. The controversy has accompanied it since its proposal, as I’ve described in posts such as What Sort of Tax?, The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, Soda Sales Shifting?, Taxes, Consumption, Soda, and Obesity, Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit?, Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, What Gets Taxed If the Goal Is Health Improvement?, The Russian Sugar and Fat Tax Proposal: Smarter, More Sensible, or Just a Need for More Revenue, Soda Tax Debate Bubbles Up, Can Mischaracterizing an Undesired Tax Backfire?, The Soda Tax Flaw in Automotive Terms, Taxing the Container Instead of the Sugary Beverage: Looking for Revenue in All the Wrong Places, Bait-and-Switch “Sugary Beverage Tax” Tactics, How Unsweet a Tax, When Tax Is Bizarre: Milk Becomes Soda, Gambling With Tax Revenue, Updating Two Tax Cases, When Tax Revenues Are Better Than Expected But Less Than Required, and The Imperfections of the Philadelphia Soda Tax.

The tax, in place now for two months after years of disagreement, has fallen short of what it needs to generate in revenue. In When Tax Revenues Are Better Than Expected But Less Than Required, I discussed the significance of the city’s report on the tax for January. The city has committed to spending $91 million annually from soda tax revenues. That requires an average of $7.58 million per month in tax collections. In January, the city collected only $5.7 million. A bit of arithmetic reveals that to reach $91 million for the year, the average monthly collection for the remaining 11 months needs to be $7.75 million per month. A few days ago, according to this report, the city announced that it collected $6.4 million. Though more than what was collected in January, it is still below the required average monthly collection. A bit more of arithmetic reveals that to reach $91 million for the year, the average monthly collection for the remaining 10 months needs to be $7.89 million per month. Each month that the revenues fall short, the target for the remaining months of the year increases.

According to the report, the city needs to increase its monthly totals to $7.7 million beginning in April. I don’t see how that would bring the total to $91 million unless somehow the city brought in $9.6 million in March or succeeds in bringing in $7 million of unpaid taxes. It’s unclear whether the unpaid taxes are amounts collected by distributors and not remitted, or amounts that the city thinks should have been collected and that might not actually be due. The city also suggests that holidays and weather affect collections, so perhaps the city is banking on a beverage buying spree come summertime. Unfortunately for the city, stories and anecdotes suggest that the buying spree might take place outside of the city limits.

My conclusion in When Tax Revenues Are Better Than Expected But Less Than Required is no less a concern:

All of this, of course, is tentative, because the challenge to the tax is on appeal in Commonwealth Court. What happens if it is struck down? Spending money that the city might be required to refund is unwise, as I discussed in Gambling With Tax Revenue. And even if the city prevails, it still appears to be a huge gamble, considering the likelihood of revenues falling short of $91 million.

It is going to be interesting tracking these monthly reports as 2017 progresses.

Last week, in What Gets Taxed If the Goal Is Health Improvement?, I commented on a suggestion that Philadelphia’s re-emerging soda tax proposal should be expanded to include diet soda. The disadvantages of limiting an alleged pro-health tax to only one allegedly unhealthy substance has been a recurring theme in my long parade of commentaries on the soda tax, starting with What Sort of Tax?, and continuing through The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, Soda Sales Shifting?, Taxes, Consumption, Soda, and Obesity, Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit?, and Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?.

Now, alerted by a reader, I have become aware of a recent “sugar and fat tax” proposal ready for enactment in Russia. According to this report, the Russian government is about to impose a tax on sugary drinks, palm oil, and probably potato chips, electronic cigarettes, and foods with high levels of fat or sugar. Russian President Vladimir Putin is said to support the tax. Russian officials explain that the tax has a dual purpose, not only to reduce the consumption of sugar and fat, but also to generate revenue.

One of the arguments I offer in rejecting a tax limited to soda or soda and some sweet drinks is that such a limitation is inconsistent with the avowed goal of improving health. I have suggested that these taxes are not much more than an attempt to raise revenue, with lip service paid to issues of health. I have contended that if health improvement is a serious goal, and assuming that a tax would actually change eating habits, the tax needs to reach more than soda, and should extent to include items such as cookies, cakes, donuts, candy bars, and junk food. The Russians appear to be taking the approach I favor, even if they admit that revenue is a motivating factor in the proposal. I doubt, however, that the tax planners and legislators in Russia found inspiration for their proposal in the pages of this blog, though the traffic sources statistics tells me that there are people in Russia reading MauledAgain.

The so-called Philadelphia “soda tax,” which taxes more than soda but not everything containing sugar, continues to pose problems. For almost ten years I have commented on this well-intended but awfully-designed attempt to improve public health, starting with What Sort of Tax?, and continuing with The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, Soda Sales Shifting?, Taxes, Consumption, Soda, and Obesity, Is the Soda Tax a Revenue Grab or a Worthwhile Health Benefit?, Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, What Gets Taxed If the Goal Is Health Improvement?, The Russian Sugar and Fat Tax Proposal: Smarter, More Sensible, or Just a Need for More Revenue, Soda Tax Debate Bubbles Up, Can Mischaracterizing an Undesired Tax Backfire?, The Soda Tax Flaw in Automotive Terms, Taxing the Container Instead of the Sugary Beverage: Looking for Revenue in All the Wrong Places, Bait-and-Switch “Sugary Beverage Tax” Tactics, How Unsweet a Tax, When Tax Is Bizarre: Milk Becomes Soda, Gambling With Tax Revenue, and Updating Two Tax Cases. Now comes news that for its first month, the revenues from the tax exceeded what was expected but fell short of the amount needed to fund the programs that the revenue from the tax is intended to support.

According to the story, Philadelphia had expected to collect $2.3 million in January, based on the assumption that businesses would delay registering with the city and the assumption that businesses had increased inventory during the last months of 2016. Instead, the city announced it had collected $5.7 million. Though it might appear wonderful, from the perspective of revenue officials, that a tax brought in more than twice as much revenue as expected, there is a problem. The city has already committed to spending $91 million per year from soda tax revenues. A monthly collection of $5.7 million won’t generate $91 million in a year. Though some think that January collections getting off to a good start bodes well for the rest of the year, I wonder whether the increasing publicity about Philadelphia residents doing more grocery and beverage shopping outside the city limits will encourage more city residents to do likewise. Another factor to consider is that the city based its revenue estimate on an assumption that sales of items subject to the tax would decrease by 27 percent. Yet since the beginning of the year, some sellers are reporting larger decreases in sales, and layoffs are expected. Layoffs, of course, will reduce other city tax revenue, as will decreasing profits for the businesses losing sales of items subject to the tax. At least one individual has suggested that the city’s $2.3 million estimate for January was low based on what distributors had been reporting they had paid to the city. I wonder if the low guess was designed to produce precisely the “tax revenues exceed expectations” headline that appeared, in an effort to make the tax seem wildly successful.

All of this, of course, is tentative, because the challenge to the tax is on appeal in Commonwealth Court. What happens if it is struck down? Spending money that the city might be required to refund is unwise, as I discussed in Gambling With Tax Revenue. And even if the city prevails, it still appears to be a huge gamble, considering the likelihood of revenues falling short of $91 million.

In last Wednesday’s post, Escaping Tax and User Fee Revenue Diversion, my analysis of a Philadelphia cigarette tax included an exploration of city residents making purchases outside the city in order to escape the tax. That point was just one piece of my criticism of a tax that puts an education expenditure burden on a narrow group of taxpayers and not on all of those who benefit from the expenditures.

Another tax that doesn’t impress me is the so-called “soda tax,” designed to change people’s beverage drinking habits. In a series of posts, beginning with What Sort of Tax?, and continuing in The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, and The Realities of the Soda Tax Policy Debate, I have criticized singling out soda when there are all other sorts of beverages and food items that contribute to excessive sugar intake. I have also criticized the disconnect between the tax and public health improvement.

Now comes news that soda tax proposals in two neighboring California cities have met different fates. According to this report, the soda tax proposal in Berkeley passed. On the other hand, according to this report, a soda tax proposal in San Francisco failed. So now what happens? Will people in Berkeley drive to San Francisco or some other nearby locality to make soda purchases, including bulk purchases? For a serious soda drinker, the tax is high enough to make the costs of the drive bearable if sufficient quantities are purchased during one shopping venture. On the other hand, for the casual drinker, the option of going out of town to make the purchase is not practical.

Does anyone seriously think that the soda tax will reduce the number of obese people in Berkeley, or raise enough revenue to make the cost of administering and complying with the tax worthwhile? Is it nothing more than symbolism? I will be watching for follow-up reports.

According to this Philadelphia Inquirer story, the mayor of Philadelphia, reluctant to cut any more essential services and squeezed by declining tax revenues from existing taxes, will propose a 2010-2011 budget that includes a $300 annual trash collection user fee and a 2-cent-per-ounce tax on beverages containing sugar. The $300 fee would be reduced, probably to $200, for low-income residents. Revenues from these two proposals are projected to make up for the current deficit in the city's budget. Not surprisingly, it is far easier to estimate the $100 million that the trash collection fee would generate than to determine how much revenue would be forthcoming from the so-called soda tax. Estimates for the latter range from $30 million to $77 million annually.

Paying separately for trash collection is not a new idea. In many localities, residents must hire private contractors, who charge whatever fee the market will bear but that will also make their enterprise profitable. In other localities, the government does the trash collection but invoices the residents separately. In some places, trash collection is provided by the local government without a separate fee, but a special fee must be paid for removal of appliances, large items, and other materials above and beyond some ill-defined notion of regular trash.

Objections to the proposed trash collection user fee in Philadelphia is that it would not reduce any taxes currently being paid by those who would be subject to the fee. If the $100 million is used to pay for trash collection, what happens to the funds that until now were being funneled into those costs? Because of the deficit, those funds don't really exist, so one would not expect an increase in funding for other activities or a reduction in other taxes. However, the mayor seems ready to propose reinstatement of leaf collection and expanding the program for cleaning up empty lots.

It is unclear whether the trash collection fee will be the same amount for someone living in a rowhouse as it is for a store, an office, or some other commercial building. If I recall correctly, the commercial enterprises must contract for private collection of their refuse. Another point of difficulty is the application of a single user fee no matter the amount of trash generated by a particular residence. When trash collection is funded from general revenues, it is possible to justify the imbalance in services received by comparing the situation to the imbalance in services received when some residents need police attention because of a burglary and others don't. Many government services are of the sort most people don't care to need, such as fire fighting, burglary investigation, and ambulance calls. People prefer to live fire-free, crime-free, and healthy. But when the service is provided for a fee, does it make sense to charge the same amount? Bridge tolls for passenger vehicles do not vary based on the number of people in a vehicle or on the weight of the passengers and cargo, even though heavier vehicles put more wear and tear on the bridge. In theory, it would be possible to charge residents for trash collection by the pound, but the cost of installing scales and training the collectors, to say nothing of how weighing would slow down the pace of the trash trucks, makes such an idea impractical.

All things considered, I would vote for the trash collection user fee. I would try to institute others, but that's beyond the scope of the news report in question.

On the other hand, the tax on sugary beverages is a non-starter for me. It's not just the issue of whether the city has the authority to impose the tax, or the issue of whether it can sneak it into the business privilege tax. Nor is it the issue of whether the city has the authority to levy a different business privilege tax on vendors of certain types of beverages. What disturbs me about the proposed tax is that it singles out one sort of food or beverage as though sugary drinks impose a cost on society that no other food or beverage does. In What Sort of Tax?, I questioned why soda would be singled out for taxation if the justification for the tax was a concern about the adverse impact of obesity on health. I again shared my criticism of a soda tax in The Return of the Soda Tax Proposal after the idea of singling out sugar-flavored beverages, but not any other unhealthy food or beverage, resurfaced. Today, I repeat that question. Why not a tax on red meat? Why not a tax on sugary chewing gum? Why not a tax on high cholesterol foods? Why not a tax on ice cream? Why not a tax on the sugar packets used to sweeten coffee?

One member of City Council asked, "If you were going to go out on the street and ask, 'Would you pay more per ounce of soda so you can have your street plowed?', I think people would say, 'Yes,' " But is there any indication that a soda tax would fund street plows? Should snow removal be funded by a soda tax? Or is there some other, better source of revenue? Surely soda consumption does not cause snow. Where's the connection?

Another member of City Council has decided to support the soda tax but oppose the trash collection user fee because the latter is, in his opinion, "more regressive and hurtful than a property tax." Aside from the anti-regressivity offered by a reduced rate for low-income residents, the trash collection user fee is no more regressive than the soda tax, because soda consumption does not increase with income. If anything, soda consumption is proportionately higher among lower income individuals in part because it is cheaper than the fancy coffees and other beverages that tend to be consumed more often by those with higher disposable incomes.

Instead, I would support a "healthy diet" tax, one that would target foods and beverages that contribute to poor health. The tax would raise revenue that could be used for city health services and funding activities that get people off their chairs and onto the playing field or into the gym, such as city parks and playgrounds, recreation centers, and youth programs. If effective as a deterrent, the tax would decrease the number of people with health problems attributable to unhealthy diets, or at least reduce the severity of those problems, thus permitting the city to incur lower expenses for ambulance service, public health clinics, and other services the costs of which increase when the health status of the populace worsens.

So I would vote no for the soda tax. Incidentally, as I pointed out in The Return of the Soda Tax Proposal, I gave up soda a long time ago, so I'm not voting from self-interest. After all, I generate less trash than anyone else in my neighborhood, but I don't fuss about the fact that my taxes aren't discounted to allow for the disproportionately reduced burden that I impose through my generation of refuse. No, I simply don't think one particular type of unhealthy beverage or food should be singled out to bear a burden that is generated by many types of unhealthy beverages and foods.

Last week, in It’s Back! The Philadelphia Soda Tax Proposal Returns, I included, among the many reasons the proposed Philadelphia soda tax misses the mark, the fact that it would not apply to all sugary products but only to beverages. Earlier this week, according to Joseph N. DiStefano’s PhillyDeals column in the Philadelphia Inquirer, beverage entrepreneur Harold Honickman made the same point. It’s not that Honickman opposes taxes, or even opposes paying a tax. What he wants is fairness. He commented, “I think there should be a sugar tax in the whole city. Why isn't ice cream, cookies, candy part of this?” Indeed. Why soda and not other items? A caterer interviewed by DiStefano explained that from servicing high school proms all over the metropolitan area, he has observed that soda drinking is rampant among public school children, whereas private school students, having been educated about the adverse effects of excessive soda drinking, frequently ask for water. Though it’s doubtful that the city’s mayor intended to work the apparent class difference into his proposal, the soda tax would have such an effect. As Honickman put it, “The rich have better choices.” No kidding.

In an editorial the other day, Jonathan Saidel made the same point. Calling the proposed tax discriminatory, he notes, “Taxing these particular products and this particular industry, while exempting many other products containing high levels of sugar or other potentially unhealthy ingredients, would be simply unfair.” Saidel also suggests that the tax would cause job losses and encourage black market activity. In another twist that had not crossed my mind, he also suggests that some or many city retailers would tax all beverages, even those not containing sugar, “to simplify their bookkeeping.”

In related news, a member of City Council declared the soda tax proposal “dead on arrival.” At least six members of the 17-person Council have expressed complete opposition to the idea. Although they may have been influenced by the anti-soda-tax rally outside City Hall, they had announced their opposition long before the rally.

I wonder whether the mayor re-floated the soda tax idea to provide a backdrop against which to set his proposed real property tax increase. If City Council decides to increase real property taxes – and signs are that it dislikes that idea no less than it dislikes the soda tax – the mayor can respond to complaints by claiming that he had offered a soda tax option that Council refused and thus it isn’t his fault that real property taxes were raised. Perhaps the mayor belongs to the school of parenting that thinks a good way to get children to eat broccoli is to offer them brussel sprouts.

UPDATE: Philadelphia City Council again rejected the soda tax, opting for an almost 4 percent increase in the real property tax. The blame-shifting and finger-pointing is inevitable.

No, the fat tax is not a tax on fat cats. Nor is there a typographical error, as the fat tax is not the flat tax. The fat tax is a tax enacted in Denmark, applicable to foods with saturated fat content exceeding 2.3 percent. According to this report, Denmark is believed to be the first country in the world with a tax on saturated fat. It is also reported that Finland and Romania are considering a similar tax. Denmark officials explain that the purpose of the tax is not to curb obesity, as Danes are thinner than average, but to increase life expectancy, a measure on which Danes lag behind.

It is unclear what use is made of the proceeds from the fat tax. Ideally, the proceeds would be funneled into health care, either specifically for research and treatment of diseases caused or worsened by the intake of saturated fat or generally for overall health care. Denmark also taxes soda and candy, but it’s also unclear where those tax proceeds are expended.

Readers of MauledAgain know that I have consistently objected to a tax on soda and sugary beverages. As I have explained in a series of posts beginning with What Sort of Tax?, and continuing in The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, and The Realities of the Soda Tax Policy Debate, my objection rests on singling out sugary beverages as a target when there are many other substances ingested by people that contribute to the rising cost of health care. As I explained in The Realities of the Soda Tax Policy Debate:

The problem with these attempted explanations for why sugary beverages are singled out in the “we need revenue, let’s tax something” version of the defeated proposal is that they rest on erroneous factual assumptions, conflate information, and ignore reality. First, though moderate and sensible use of sugar does not trigger obesity and other illnesses, there is no such thing as moderate use of tobacco because any use of tobacco ramps up the risk of cancer and other disease. Second, sugar is not the only substance that, consumed excessively, causes health problems. Excessive intake of fat, for example, is just as dangerous, if not more so. Even water can be deadly, as evidenced by people who have died in foolish water drinking contests. Where is the logic behind “Sugar is bad, tax it, fat is bad, don’t tax it”? The notion that people will take in more sugar drinking soda because soda is not filling ignores the fact that gulping down a huge amount of liquids will leave a person with less stomach room, and less desire, to take in food. Does it make sense to encourage the ingestion of Twinkies rather than soda because it’s better to fill the stomach with sugar and fat? Finally, the notion that cigarette taxes has cut smoking is debatable, particularly with respect to tobacco use among younger people, who supposedly are the targets of the “tax will teach you a lesson” proponents.

From a health perspective, the target needs to be the items originally indicted by the Yale researcher, namely, high-calorie, low-nutrition substances. The issue isn’t so much the item, other than the true poisons such as nicotine and trans-fats, but the quantities being consumed. Even low-calorie, high-nutrition foods can be dangerous if consumed in excess. The focus on soda, intense as it is on the part of the soda tax advocates, suggests something more is at work. I wonder if we would be seeing “donut tax” proposals offered with the same zealousness had it been donut manufacturers who tossed money at school boards to install vending machines in the schools. I wonder.

Interestingly, according to the report, Denmark has banned the use of trans fats, and thus there is no tax on them. Although saturated fats also contribute to cardiovascular disease and cancer, Denmark has opted not to ban them but to tax them, not unlike what governments in the United States do with tobacco.

One Danish citizen interviewed by ABC News explained, “Denmark finds every sort of way to increase our taxes. Why should the government decide how much fat we eat? They also want to increase the tobacco price very significantly. In theory this is good — it makes unhealthy items expensive so that we do not consume as much or any and that way the health system doesn’t use a lot of money on patients who become sick from overuse of fat and tobacco. However, these taxes take on a big brother feeling. We should not be punished by taxes on items the government decides we should not use.” These observations demonstrate the tension between individual liberty and societal responsibility. Governments care about the health of its citizens, or, because governments are the citizens, citizens care about the health of other citizens for several reasons. An out-of-shape citizenry is in no condition to defend the nation. An unhealthy citizenry diverts scarce resources from efforts to make progress economically, socially, culturally, and technologically to efforts to repair the damage caused by unhealthy practices. To the extent health care is covered through insurance systems, it is in the interest of every insured to keep the overall risk as low as possible. That goal is enhanced when unhealthy behavior is reduced, either through education and encouragement or through prohibition and penalty. A balance between individual liberty and societal intervention can be reached if responsibility for individual decisions rested solely on individuals. Thus, the person who engages in unhealthy and risky behavior and who is unwilling to participate in societal insurance or to be subjected to societal restrictions must be willing to bear the full cost, without societal assistance, of the consequences of that behavior. What sort of society, though, is willing to tell a person who shows up at an emergency room, “You chose to ignore the speed limit, not wear a seat belt, and not purchase health or accident insurance, so we cannot assist you.” Frighteningly, there are increasing numbers of people who want to take that approach. But there is a flaw in their reasoning. What if the unhealthy behavior brings consequences beyond the person engaging in that behavior? What does a society say to a person who is injured, or whose family member is killed, because another person’s unhealthy behavior led to, for example, a heart attack that triggered a traffic accident?

The Danish citizen’s concern about big brother is real but misplaced. The fear that government is becoming or has become big brother is a distraction. The deeper concern is that private actors in the private sector act as big brother. For every government security camera, there are many more private sector cameras. For every government form that citizens fill out with personal information, there are many more private sector information collection devices doing the same and more. For every government rule or law, there are many more private sector regulations. The question is whether the cameras, the information collection, and the laws should be imposed by a non-accountable private sector oligarchy or by a government accountable through the ballot box. The latter option, of course, is rapidly disappearing as the oligarchy continues to acquire increasing amounts of electoral power disproportionate to the principle of one person, one vote.

There is value in shifting the cost of health care to the practices and substances that jeopardize good health. But that shifting needs to be consistent. Selecting one or two items, such as soda and saturated fat, while ignoring others, is a recipe for ultimate failure. The ideal tax is one that, for the moment at least, cannot be administered. One of the most serious contributors to health issues is excess caloric consumption. Because calories abound across the menu, a tax on all foods accomplishes nothing in this respect. That is why the better approach is education. Again, there is a serious tension between those who think that dietary and nutritional should be delivered by the public sector, for example, schools, and those who think it is a matter for the private sector. But a quick look at this country’s population is visible proof that reliance on the private sector to promote good health and educate people with respect to beneficially healthy practices has been pretty much a failure. That is why some people advocate soda and fat taxes. Though that advocacy is understandable and well-intentioned, it is too narrowly focused, and if focused appropriately, runs into the barrier of impractical application.

Several days ago, in Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, I questioned whether the latest soda tax proposal in Philadelphia was more a matter of raising revenue than improving health. My question was triggered by my long-held position that if the goal of a soda tax is to reduce the ingestion of sugar, the tax ought to be a sugar tax imposed on far more than just soda. That’s not to say that a sugar tax is ideal, because sugar is far from the only substance that can cause health problems. It’s simply a matter of logic and consistency, and the unfairness of singling out one sugar-containing item while claiming that a tax on that item reflects the health hazards of sugar.

In reaction to the sugar tax proposal, Will Bunch offers the suggestion that the tax ought to apply not only to regular soda but also to diet soda. His suggestion takes two perspectives. One is that diet soda also is unhealthy. The other is that expanding the base of the tax would permit either increased revenue or a lower tax rate.

Bunch makes a good point. It is not dissimilar to my concern that limiting an allegedly pro-health tax to only one of many substances that contribute to poor health is a bit too disingenuous. Bunch has provided a good service to everyone involved in the soda tax debate, by putting the spotlight on a substance that does not contain sugar but that is similarly unhealthy. For decades, so-called sin taxes have been applied to items perceived as dangerous, yet popular, such as tobacco and alcohol. True, those items pose serious health risks. Tobacco is a health risk, period. Alcohol is a health risk when used to excess, and in some instances is beneficial to health. Sugar, too, poses its risks when consumed in high quantity. Removing all sugar from one’s diet also endangers health. But does the list stop with sugar-containing soda, or diet soda? There’s a long list of items that, if consumed excessively, or even at all, pose health risks. In my last post on the issue, I mentioned French fries, red meat, deep fried cheese sticks, churros, popcorn shrimp, and junk food. Bunch widened my perspective. The question becomes, what other items belong in the list? GMO modified foods? Non-organic food? Water from Flint, Michigan? Governments that truly care about health ought to act consistently with that claim, and not use health as an excuse for taxing certain selected items.

A little more than a month ago, in Soda Tax Debate Bubbles Up, I noted that I had heard a radio spot on a local radio station seeking support in opposition to the soda tax proposed by Philadelphia’s mayor. I explained:

What had caught my ear was the characterization of the tax as a “grocery tax.” According to the organization’s web site, No Philly Grocery Tax, the tax would be a “3¢ per ounce tax on everyday grocery items.” Sure, the site then adds “like sodas, sports drinks, juice drinks and some teas” but the initial characterization will cause people to think that a proposal is underway that will tax everything in their shopping cart. Once that seed is planted in most people’s brains, it’s difficult to root it out. Even if the tax was imposed on all unhealthy food and drink items, it still would not be a tax on groceries, because it would not reach a long list of healthy items.

Though I oppose the soda tax as it is presently constructed, particularly because the concern is sugar, not beverages, I suggested that gross mischaracterization could work to the detriment of those overstating their case against the tax:

Simplistic reactions and mischaracterizations, no matter from which side of an argument, do not serve the public well. Though they can help advance the cause of those who toss them about, they also can backfire.

So it was no surprise to me when, a few days ago, I read a letter to the editor of the Philadelphia Inquirer by Dr. Barbara W. Gold, vice chair of Food Trust’s board. She pointed out that calling the soda tax a grocery tax is a scare tactic, is dishonest, and misleading. On those points she is correct. The soda tax will not cause a “large spike in grocery prices.” She describes other food items as “real groceries,” though that designation also is confusing, because soda is an ingestible item sold in, among other places, grocery stores.

Where I disagree with Dr. Gold is her support of a tax on “the beverage industry’s multibillion-dollar annual profits” to pay for desirable city programs. As I have continually pointed out, as unhealthy as soda can be, so too are other items, including some of the baked goods and frozen foods Dr. Gold includes within the category of “real groceries.” Medical research has demonstrated that one of the serious culprits in health issues is sugar. Limiting a sugar tax to sugary drinks is akin to limiting a tobacco tax to tiny cigars.

As I also pointed out in in Soda Tax Debate Bubbles Up:

The ease with which people not only fling such accusations but also readily accept and repeat them contributes to the sad state of this nation’s public and private political debate in the twenty-first century. It’s time for those involved in the soda tax debate, as well as any other political discussion, to focus on the facts and to stick with logic.

Dr. Gold’s letter is a step in the right direction, but it doesn’t go far enough, and it adds, perhaps inadvertently, another layer of confusion by introducing the confusing term “real groceries” into the discussion.

Ultimately, claiming that the proposed soda tax is a grocery tax will backfire. It distracts people from the central issues. Some people will look at that claim, consider it an overstatement, and decide that it reduces their confidence in the position being taken by those opposing a tax on, or limited to, certain beverages. To the extent these people end up supporting the tax proposal because of the overstatement by an opponent of the tax, the hyperbole will turn out to be counter-productive.

Readers of MauledAgain know that I consider chocolate to be medicinal, and in many respects, essential. Of course, like any food item, it ought to be consumed in moderation.

Recently, the San Francisco School District has decided to prohibit elementary and middle school students from drinking chocolate milk. According to this report, and others, the school board has grouped chocolate milk with candy, cookies, and soda on its list of “foods bad for children.”

Eight years ago, in Tax-Free Beverages: Let Them Drink Chocolate?, and More on Tax-Free Beverages: Let Them Drink Chocolate, I explored the reactions to a proposal that chocolate milk be substituted for soda in school cafeterias, and shared a reminder sent to me that chocolate milk, like all chocolate, has medicinal properties beyond calcium, vitamin D, and other nutrients. The concern of those who advocate chocolate milk bans is the additional sugar in chocolate milk. The concern of those who oppose these bans is the evidence that when chocolate milk is prohibited, milk consumption by school children drops significantly, depriving them of calcium, vitamin D, and other nutrients present in milk. According to this commentary, “Several studies have examined the effects of drinking milk (flavored and white) on sugar and calorie intake. Two studies published in the Journal of the American Dietetic Association in 2002 and 2008 found that those who drank milk (flavored or plain) got in more nutrients like calcium, vitamin A, phosphorus and potassium and didn’t consume more sugar or calories than non-milk drinkers.” Perhaps the sugar from the chocolate milk offsets the desire to chomp down on a chocolate candy bar after drinking plain milk.

Fortunately, a solution has emerged. It is possible to purchase chocolate milk to which no additional sugar has been added. It’s an easy online search. Because milk contains natural sugar, it’s unclear why sugar needs to be added when cocoa powder is added, but perhaps it has something to do with the efficacy of the sugar industry lobby.

In any event, it appears that many school districts that banned chocolate milk eventually reversed course. It isn’t clear if they introduced no-sugar-added chocolate milk or reverted to the sugar-added variety.

Of course there is a tax angle to this. How long will it be before chocolate milk gets lumped with soda for purposes of the soda tax? Before the details of the soda tax were designed, I predicted, in Tax-Free Beverages: Let Them Drink Chocolate?:

Ultimately, several big decisions loom if a tax on sugar-laden foods moves forward. If chocolate milk is subjected to such a tax because it contains sugar, ought not white milk also be taxed? Granted, many fruits contain sugar, but I expect a “fruit exception” to be drafted into “sugar tax” legislation. If an exception is made for white milk, logic would dictate that combining exempt white milk with exempt strawberries should create tax-free pink milk. As for the chocolate milk, full use should be made of the vegetable exception. Chocolate is a vegetable, is it not?

What happened? As I noted in When Tax Is Bizarre: Milk Becomes Soda, the Philadelphia soda tax applies to almond, rice, and cashew “milk.” If chocolate milk gets added to that list, it will be yet one more reason soda taxes are not a sensible pathway to improving Americans’ dietary habits. As I noted in Gambling With Tax Revenue, “Taxing almond milk but not doughnuts belies the claim that the soda tax is designed to, and will improve, health.”

Monday's Philadelphia Inquirer featured an article, the name of which, Cut Calories by Taxing Soda, almost says it all. According to the article, Kelly D. Brownell, director of the Rudd Center for Food Policy and Obesity at Yale University, has wiped the dust off of his 1994 proposal to impose a one cent per ounce tax on sugared drinks. Although, according to Brownell, he "got blistered" in 1994, he's ready to try again because during the past 15 years obesity rates, particularly among children, have increased and governments find themselves in need of revenue. Together with Thomas R. Frieden, who is New York City's Health Commissioner, Brownell published a report last week that "daily caloric intake from sugar-sweetened drinks rose nearly 30 percent in the last decade." They estimate that the one cent per ounce tax would generate $1.2 billion in annual revenues in New York State. Whether that refers to a state tax, or combined state and local taxes, isn't clear. No matter, it's a good chunk of change.

The idea of imposing so-called "sin taxes" as a way of reducing government budget deficits isn't new, and has grabbed the spotlight in recent months. As I pointed out in Taxing Barbie, detrimental behavior that does not infringe on another person's rights usually is not criminalized, but taxed. I noted the taxes on tobacco, alcohol, and gambling, and mentioned proposals to tax fast fook, carbon-based fuels, ammunition, and furs. More specifically, the idea of taxing non-diet soda and other sugar-containing beverages was included by New York's governor in his recent budget proposal. In What Sort of Tax?, I discussed the proposal. I questioned whether it made sense to single out soda, or soda and certain beverages, if the purpose of the tax was to increase the cost of behavior that contributes to obesity. I explained, though one might think it should not need explanation, that non-diet soda soda isn't necessarily any worse than other foods when it comes to causing obesity. Even low-calorie foods, when consumed in sufficient quantity, can cause a person to gain weight. The authors of this essay on the question volunteered that when they asked the New York State Health Commissioner about this point, he replied that if economic needs justified extending the tax to "other high calorie foodstuffs [such as] cheeseburgers, pizza, and snack foods," he would do so.

Not surprisingly, there is opposition to the imposition of taxes on non-diet soda and similar beverages. Some opposition can be found among those opposed to taxes on general principles. Some opponents, such as the American Beverage Association, claim that soda has little or no effect on obesity. Others claim that the tax would affect poor people, which is true of most sin taxes. Still others claim that popular opinion disfavors the tax, although others claim that their polls show the opposite if the funding is directed into public health programs.

The sort of tax in question is much like a user fee. User fees make sense when they are related to a burden that the taxed item or activity imposes on society. A user fee is equitable when it treats all similarly situated items or activities in a comparable manner. No tax or user fee ought to be imposed simply because it can be imposed, or simply because a government prefers to increase its revenue. Some sort of justification is required. In this instance, if the purpose of the tax is to pay for the cost of ingesting excess caloric intake, then the tax needs to be tailored in a manner that doesn't focus the "blame" on specific foods or beverages. The administrative difficulty with excess caloric intake is that no food or beverage can be singled out as the cause, and yet every food and beverage can be the cause. Any food ingested in sufficient quantity can be unhealthy. If the justification for taxing soda is that it contributes to obesity, what is the sense of imposing the tax on a non-obese person who makes the purchase? That question illustrates the administrative problem, because the purchaser may not be the actual consumer.

In theory, the best tax or user fee designed to reduce obesity should be a tax or fee based on weekly weigh-ins. That sort of tax would be near-impossible to administer. Who would do the weighing? How would cheating be prevented? Who would handle the dispute about scale accuracy? Compliance surely would be a huge problem, no pun intended. But if the next best thing is a tax on foods and beverages that are more likely to contribute to obesity, then singling out beverages containing sugar appears to be nothing more than the pet project of the artificial sweetener lobby. What about those cheeseburgers and, I daresay, peanut butter cups?

Would not a tax on sugar-containing beverages compel at least some people to use alternative items? Would this not heighten the battles among the various sugar-substitute manufacturers, each of whom is eager to point out the health risks of their competitors' products? If the tax were successful, to the extent that everyone switched to diet whatever, would the tax not be successful in the sense that it would no longer raise revenue?

Why the focus on obesity? Is there not also a concern about excessive thin-ness? Does not being underweight pose health problems? What would happen if there were a tax on failure to consume sufficient calories? If the answer is that someone who eats too little already suffers enough, cannot the same be said about the obese?

Think also of the other dietary practices that adversely affect health. Consumption of sugar-containing beverages can be detrimental to one's well being. But so, too, can be a diet devoid of vegetables. Will the meat and potatoes crowd be the next target of the healthy lifestyle advocates? Would a tax on caffeine be helpful to societal well being because it might reduce the number of over-caffeinated individuals roaming the planet?

My perspective isn't that of someone who doesn't care about proper nutrition. I gave up soda (or pop, or soft drink, or whatever one calls it) a long time ago, chiefly because I preferred to avoid the carbonation. I've cut my weight by trimming down my intake of those chocolate chip cookies and peanut butter cups, among other things. I exercise. So I very much would like to see a nation of fit and healthy people, for a variety of reasons into which I presently will not delve. I simply don't think that a tax on sugar-containing beverages, or even a tax on supposed unhealthy foods, will make a difference, because it doesn't attack the root cause of the problem. What activity or item can be taxed when the problem is a psychological one rooted in lifestyle and culture? Even if it could be identified, and I don't think it can be, would it be appropriate to tax it? No.