Finding the Connection Between Philadelphia's Proposed Rideshare Tax and the Funding of Public Schools

As reported in numerous stories, including this one, the Mayor of Philadelphia has proposed raising an earlier proposed 20-cent tax on a rideshare to a $1 tax. The revenue would be used to fund Philadelphia's public schools. When I tried to learn the justification for using a tax on rideshares to fund the schools, all I could find is that it would raise millions of dollars for a school system in desperate need of funding.

Debate seems to focus on whether the rideshare companies would pay the tax or whether it would be passed along to passengers. When a city council member pointed out that the legislation required the rideshare companies to collect the tax from passengers, the city's Finance Director argued that the companies "can then decide how they want to pass that on... increased their fee or hold riders harmless."

What I haven't discovered is any discussion about the justification for charging rideshare companies or rideshare passengers a tax to fund public schools. Do rideshare companies and their passengers obtain a greater benefit from the public schools than do other companies and other individuals? Do rideshare companies and their passengers impose a greater burden on the public schools than do other companies and other individuals? I cannot find anyone advocating this proposed tax addressing these questions.

Readers of MauledAgain know that I had similar objections to the city's soda tax. As I wrote in Will a Revisit of Philadelphia’s Soda Tax Bring Me an Invitation?, " As I pointed out in some of my commentaries, if the soda tax was truly about improving health, the tax should and would be a tax on sugar and similar substances and not just beverages. Instead, the tax is about revenue, and the large amount of sugary beverages sold in Philadelphia was, and to some extent still is, low-hanging tax revenue fruit."

The proposed rideshare tax strikes me as another way to collect revenue from an easy target despite the lack of a link between those paying the tax and what it funds. It will negatively impact rideshare passengers, either directly or indirectly, especially those who use rideshare services because they cannot afford to own their own vehicle. It will tempt the city to raise the tax until it begins encouraging rideshare companies or their drivers to pull out of the city.

Will a Revisit of Philadelphia’s Soda Tax Bring Me an Invitation?

It’s been a while since I’ve written about the Philadelphia soda tax. I wrote many commentaries about the tax from the time it was proposed until it was enacted and debates about the tax faded as other issues moved to center stage. Those commentaries included 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, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Another City Cuts Soda Tax Revenue Estimates, Putting Funding Burdens on Those Who Pay the Soda Tax, What Is a Successful Tax?, What’s Next? A Tax on Exiting the Store? How Unwise Taxes Undermine Tax Policy, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, Was the Philadelphia Soda Tax the Product of Revenge?, Did a Revenge Mistake Alter Tax History?, What’s More Effective? Taxing and Restricting Soda or Educating People About Healthy Lifestyles?, If Sugar Is Bad And Is Going To Be Taxed, Tax Everything That Contains Sugar, Time for a Salt Tax to Replace a Soda Tax?, Soda Taxes: So It’s Not So Much the Soda, Is It?, The Soda Tax “War” and a Pathway to Tax Peace, The Primary Goal of the Philadelphia Soda Tax: Not a Reduction in Soda Consumption, and Unintended Consequences in the Soda Tax World Present Questions.

Now comes a Philadelphia Inquirer story letting us know that Philadelphia has decided to hold hearings on the soda tax. One member of Council noted that the tax “disproportionately affects the poor” and that Council should look for other sources of revenue. As I pointed out in some of my commentaries, if the soda tax was truly about improving health, the tax should and would be a tax on sugar and similar substances and not just beverages. Instead, the tax is about revenue, and the large amount of sugary beverages sold in Philadelphia was, and to some extent still is, low-hanging tax revenue fruit.

Interestingly, according to a study reported in this Philadelphia Inquirer story, the tax has had an impact on Philadelphians’ health. Whether that impact is positive is questionable, considering that the study showed Philadelphians’ body mass index increasing though at a slightly slower rate than for people outside of the city. Supporters point to substantial drops in soda sales within the city, but that doesn’t demonstrate purchases of soda have declined substantially. It only proves that purchases made within the city, rather than across the street in other municipalities, have decreased.

The Council member who noted that the tax adversely affects the poor then explained that, “I just want to look at [the tax.] I’m not saying we’re going to do anything with it. I just want to make sure that I bring everybody in that has an opinion about it.” It doesn’t hurt to review periodically all sorts of laws and taxes. Of course, I have an opinion about the tax. I’ll let you know if he brings me in.

Unintended Consequences in the Soda Tax World Present Questions

I have been writing about the soda tax for about 14 years, though I haven’t written very much in recent years, perhaps because I have said all that I think needs to be said. My thoughts can be found 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, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, The Soda Tax “War” and a Pathway to Tax Peace, and The Primary Goal of the Philadelphia Soda Tax: Not a Reduction in Soda Consumption.

But occasionally a story or an email comes along that re-awakens the part of my brain that focuses on the soda tax. Several days ago a reader alerted me to this story, with the eye-catching headline, “Seattle's Soda Tax Goes Horribly Wrong.” The report described a study comparing Seattle, which enacted a soda tax, and Portland, which did not, and determined that in Seattle sales of beer, though not wine, increased as sales of soda decreased. Though beer, and wine, are taxed in Seattle, they are taxed at what amounts to a lower per-ounce rate. The article points out that 16 ounces of regular soda has roughly 140 calories whereas beer has roughly 200 calories for the same amount.

The reader who sent the email wrote, “I believe you predicted this result several years ago.” I replied that I did not think I had addressed this consequence of a soda tax, instead focusing on other issues. Those included the silliness of taxing sugary beverages but not other products containing sugar, of language that brought beverages within the scope of the tax that are healthy rather than unhealthy, shortfalls in predicted revenues, discrepancies between planned and actual uses of the revenue, and litigation over the tax.

But as I sat down to write this post, I searched my blog and discovered that two years ago, in Unintended Consequences in the Soda Tax World, I had described reports and studies showing that the same thing happened in Philadelphia, though as soda consumption decreased, there was an increase not only in the consumption of beer, but also wine and certain liquors. Though I did not predict this result, I did write about it, which means that the part of my brain that focuses on the soda tax did not fully awaken when I read the email.

In my reply I also shared a question that popped into my brain after reading the email. Are children, who also consume significant amounts of soda, also shifting to beer? Hopefully not. And now I add more questions. So is soda consumption among Seattle children not declining? Is it declining and being replaced with some other beverage? If so, is it a beverage that does not appeal to former soda-drinking adults as much as beer? And, I suppose, in the meantime, people of all ages continue to consume donuts, cookies, pies, cakes, and candy, so what is happening to sugar consumption?

The Price of Eliminating a State Income Tax

According to this story, the governor of West Virginia wants to eliminate the state income tax. Why? To “make the state more appealing for out-of-state residents and businesses.” The state’s income tax, according to another report on the proposal, generates $2.1 billion in revenue, which about 43 percent of the annual budget.

Of course, if the income tax is repealed, the state faces a choice between reduction of services, increases in other taxes, or some combination of both. At a virtual town meeting, the governor was asked about reducing services and replied, “No chance on the planet. . . . A decrease in services – ridiculous.” He added, “My goal is to lower your taxes, now. There is a million different ways this can be done.” I wish someone had asked him to list the million ways to reduce taxes without reducing services.

So that means repeal of the income tax requires increases in other sources of revenue. The governor explained what he would do to raise $2.1 billion in lost revenue. He would increase the sales tax by something between 1.5 and 1.9 percentage points, from 6 percent to 7.5 to 7.9 percent. He would increase taxes on tobacco and soda. He was open to raising taxes on liquor. He would increase severance taxes on coal, oil, and natural gas. He suggested “there could be an unspecified tax on some professional services.” He suggested a new tax, which he inadvertently called a wealth tax, but then explained it would be a luxury tax, something akin to a sales tax on the purchase of items costing $5,000 or more, other than homes and cars. He opposed raising the gasoline tax.

The governor then paraded out the usual litany of why reducing or eliminating taxes is a wonderful accomplishment. “It will drive job opportunities beyond belief. It will drive the ability for wages to increase substantially, it will help our schools, it will drive up property values.” He also claimed that eliminating the income tax and replacing it with increases in other taxes would reduce the “net tax burden” for state residents. All that it would do would be to shift the tax burden from some residents to other residents. More on that in a moment.

The governor then admitted, in response to a question, that the goal of his plan is to “give people from other states in that upper income bracket an “incentive” to come and settle in West Virginia.” It seems to me that enticing someone to move to a state requires more than low or lower taxes. It requires a state that has high quality education, a clean environment, reliable power sources, sufficient water and food supplies, excellent medical care and health facilities, adequate highways, bridges, and tunnels, top-notch cyber infrastructure, and programs to reduce poverty, crime, addiction, and disease.

The current West Virginia income tax is a progressive tax. It imposes higher rates as income increases, though the rates are low in comparison to most other states and the federal income tax. On the other hand, the taxes that the governor wants to increase are regressive taxes. They take a higher portion of a lower income person’s income than they take from a higher income person’s income. The so-called luxury tax won’t make up the difference, because any wealthy person who did decide to move to West Virginia would have the means to make those purchases elsewhere. The proposed luxury tax, like a sales tax, is rather easily avoided by those intent on doing so.

So the proposal is just another piece of the grand plan to free the wealthy from tax burdens and impose the cost of civilization on the poor and working class, to push them in the direction of serfdom as much as possible. What continues to boggle my mind is the willingness of those being oppressed economically to vote for those making their economic condition increasingly worse. It reminds me of the person who exits through the wrong door on the Wilkos show. And then eventually regrets it, when it’s too late to prevent the ensuing tragedy.

An Unwise Tariff Decision

As reported by many sources, including this story, the Administration’s tariff on aluminum imported from Canada has gone into effect. The impact on American purchasers of products made with aluminum is easy to predict. The prices they pay will increase. Why? Because the American manufacturers paying the tariff will pass the cost through to their customers. Tariffs are, for all intents and purposes, taxes. They are taxes on the value of material, items, goods, or products imported into, or exported from, a country. So, in effect, this tariff is a hidden tax increase on Americans, and because of its nature, qualifies as a regressive tax.

The tariff was imposed because the President “claimed that the American aluminum business has been ‘decimated’ by Canada.” He accused Canadian aluminum producers of “flooding the U.S. with exports.” There is a reason aluminum imports have increased. Demand has increased. Why? According to this editorial, “aluminum demand has gone up as pandemic quarantines have driven bar patrons home and away from draft or bottled beer. In addition, the growing popularity of hard seltzers has increased demand for aluminum cans.” It is not unrealistic to expect consumers of beverages sold in aluminum cans, including not only beer but also soda, ice tea, and other drinks, discovering the cost of their purchases going up. How many will understand why?

Oddly, according to the Aluminum Association, imports of Canadian aluminum have dropped. So much for the President’s “flooding” nonsense.

In addition to this hidden regressive tax increase, the tariff also poses threats to American jobs. Why? Canada has announced it will retaliate. According to this report, Canada is working on a list of American products, some of which are described in the report, on which it will impose tariffs. This will reduce demand and put workers in factories making those products at risk of losing their jobs. Why? Because jobs reflect demand, not supply.

So while this tariff war instigated by the “deal maker” ravages both the United States and Canada, long-time allies with a history of cooperation, does anyone benefit? According to this story, the Canadian ambassador to the United States explained that “two of the biggest beneficiaries from the Trump administration’s reimposition of 10 per cent tariff on some imports from Canada will be a Swiss trading firm and a Russian producer.” I wonder how many people complaining about the increases in the cost of beer, soda, and other beverages will take the time to understand what actually is happening.

The Primary Goal of the Philadelphia Soda Tax: Not a Reduction in Soda Consumption

The soda tax is one of those topics that probably will never go away. I have been writing about the soda tax since 2008, 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, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, Was the Philadelphia Soda Tax the Product of Revenge?, Did a Revenge Mistake Alter Tax History?, What’s More Effective? Taxing and Restricting Soda or Educating People About Healthy Lifestyles?, If Sugar Is Bad And Is Going To Be Taxed, Tax Everything That Contains Sugar, Time for a Salt Tax to Replace a Soda Tax?, Soda Taxes: So It’s Not So Much the Soda, Is It?, The Soda Tax “War” and a Pathway to Tax Peace, and The Soda Tax “War” and a Pathway to Tax Peace.

Now comes news from the Philadelphia Inquirer that a recent study by Drexel University researchers indicates that the amount of soda and other sugary drinks consumed by Philadelphia residents declined so little since enactment of the soda tax that the change is statistically insignificant. The decline was essentially the same as in places without a soda tax. Interestingly, a study in Washington state determined that soda sales in Seattle, which has a soda tax, dropped by 30 percent while sales in Portland, Oregon, which does not have a soda tax, dropped by 10 percent. However, not all sources of sugary beverage purchases were taken into account, and though retail establishments outside each city were included in the survey, only those within two miles were considered. The sweetened beverage tax in Cook County, Illinois, which didn’t last very long, reduced sales by 21 percent, according to the study reported in this story, but purchases outside the county limits did not seem to have been taken into account. One conclusion from these results is that consumption of sugary beverages is dropping generally, for a variety of reasons other than taxes, and that soda taxes are contributing, at best, a marginal increase in that decline.

Yet what struck me from the Philadelphia Inquirer story is something said by Lauren Cox, a spokesperson for the administration of Mayor Jim Kenney, the principal supporter of Philadelphia’s soda tax. As I described in Philadelphia’s Latest Soda Tax Proposal: Health or Revenue?, Kenney voted against the soda tax when it was proposed by his predecessor, but once he took office he flipped positions. Why? I suggested, “The answer appears to be quite simple. The new mayor has discovered that his spending proposals, such as universal pre-kindergarten, community schools, park and recreation center upgrades, and similar projects, require revenue. Rather than raising any existing taxes, he has turned to a tax on certain sugary drinks.” I added, “If the concern is health, as soda tax advocates claim, and if a significant cause of health problems is sugar, as soda tax advocates claim, and as research tends to demonstrate, then why not a sugar tax? Why not a tax not only on sweetened drinks, but also on cakes, cookies, pies, donuts, sugared coffee, ice cream, and candy?” According to the Philadelphia Inquirer story, Cox “said that reducing consumption was not the city’s primary goal in implementing the tax.” So what was the primary goal? Let me guess. Revenue.

The Soda Tax “War” and a Pathway to Tax Peace

The soda tax has been the subject of MauledAgain commentaries since 2008, though it has been about a year since I last wrote about it. I have written about the soda tax 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, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, Was the Philadelphia Soda Tax the Product of Revenge?, Did a Revenge Mistake Alter Tax History?, What’s More Effective? Taxing and Restricting Soda or Educating People About Healthy Lifestyles?, If Sugar Is Bad And Is Going To Be Taxed, Tax Everything That Contains Sugar, Time for a Salt Tax to Replace a Soda Tax?, and Soda Taxes: So It’s Not So Much the Soda, Is It?.

One of the reasons that the soda tax hasn’t been popping up in this blog for the past 12 months is that there has been much less activity and fewer attempts at enacting soda taxes across the nation. One reason, perhaps the principal reason, for this pause is explained in a Philadelphia Inquirer article from a few days ago. According to the article, the prediction that many localities would follow the soda tax legislation enacted in Philadelphia has not come to fruition because the soda industry expanded its fight against the tax from Philadelphia and other local jurisdictions to state legislatures. Despite public health officials predicting that dozens, if not hundreds, of cities and towns would enact soda taxes or some variant of soda taxes, only seven cities have one in place. It has been two years since a city has enacted a soda tax.

What the beverage industry has been doing is to lobby state legislatures to enact legislation prohibiting local governments from enacting soda taxes, and in some instances, other taxes as well. There are a variety of reasons state legislatures are easily persuaded to prohibit local governments from adding new taxes. State legislatures find it convenient to hold taxing power, because it provides leverage with respect to other issues. State legislatures can be cognizant of the “border crossing” issue, as exemplified by the number of Philadelphia residents taking their beverage, and even grocery shopping, across the city’s boundaries into adjacent suburban towns.

Though Philadelphia was not the first city to enact a soda tax – Berkeley, California was – its legislation and experience became a model for subsequent enactments and Philadelphia became the focal point of the dispute between soda tax advocates and the beverage industry. Though six other cities have a soda tax – Seattle, Boulder, Colorado, San Francisco, Oakland, Berkeley, and Albany, California – attempts to enact a soda tax in Santa Fe, New Mexico, was voted own, and Cook County repealed the one it had enacted. Seven proposals pending elsewhere have not been enacted.

Philadelphia’s mayor Jim Kenney, the leading advocate of soda taxes in Philadelphia, reacted to the hiatus in soda tax enactments by expressing this thought: “It’s a shame, because that money could be going to really good purposes in many communities.” It’s interesting that his focus was on the revenue, and not on the alleged public health benefits. Throughout my commentaries, I have stressed that the soda tax was motivated more by the quick and simple increase in revenue that it presents rather than a true concern for public health, because a genuine public health motivation would extend the tax to all sugar-containing foods and beverages, and would not reach, as some of these taxes do, beverages that do not contain sugar.

Opponents of Philadelphia’s soda tax want its repeal, though some seem willing to accept a modification. The biggest complaints are the high rate of the tax and the application of the tax to beverages that are far from unhealthy. The solution, of course, is what I have been proposing all along, that is, to expand the tax to include all items containing sugar and to lower the rate. Properly drafted, the revenue would be unaffected but the rate would be reduced to a level sufficiently low that it would not have the negative collateral effects that the current tax generates.

The so-called “war,” as the article describes the political jockeying, will continue, both in Philadelphia and across the nation. It will end only when the two sides find a way to meet in the middle, as I propose. Unfortunately, the likelihood of that happening is low, because at the moment whatever issue is being considered across the nation, the two sides line up in such a way as to make the middle a dangerous, and thus unattractive, place. Until the zealots on both sides find a way to understand the long-term disadvantages of zealous partisanship, not just on taxes or soda taxes or any issue, “war” and its adverse consequences will continue to thwart human progress.

Soda Taxes: So It’s Not So Much the Soda, Is It?

I have been writing about the flaws of the soda tax for more than a decade, beginning 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, Updating Two Tax Cases, When Tax Revenues Are Better Than Expected But Less Than Required, The Imperfections of the Philadelphia Soda Tax, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, Was the Philadelphia Soda Tax the Product of Revenge?, Did a Revenge Mistake Alter Tax History?, What’s More Effective? Taxing and Restricting Soda or Educating People About Healthy Lifestyles?, If Sugar Is Bad And Is Going To Be Taxed, Tax Everything That Contains Sugar, Time for a Salt Tax to Replace a Soda Tax?, and So the Soda Tax Really Was About the Revenue and Not So Much About Health. One of my criticisms is that the soda tax misses the mark if the goal of its supporters is truly to reduce sugar intake, because not only does the soda tax apply to some liquids that are not unhealthy, it also fails to reach most items that contain sugar. As I wrote in So the Soda Tax Really Was About the Revenue and Not So Much About Health:

One of my several criticisms of the soda tax is that it singles out certain liquids that contain sugar, and ignores other sugary substances. . . .

Another, related, concern that I have about the soda tax is that it is premised on the claim that it is designed to improve people’s health, yet it is not applied to any food or beverage that is unhealthy other than sugar. So is sugar the prime cause of bad health? According to a recent study, reported in this article, the answer is no. I wrote about that flaw of the soda tax in Time for a Salt Tax to Replace a Soda Tax?

Another concern, to which I’ve not given much attention, is the inequity of taxing sweetened beverages based on the number of ounces in the beverage rather than the amount of sugar. If the primary goal of the soda tax is to reduce sugar consumption, then even aside from the failure to tax solid forms of sugar, the tax should reflect the amount of sugar in the drink. Some sugary beverages contain twice or three times the sugar in a given number of ounces than do other sugary beverages.

All of these concerns, along with the silliness of taxing some items that are healthy despite having some sugar content, have contributed to my conclusion that the soda tax is designed for revenue production rather than health benefits. Taxing beverages is much easier than taxing all sugar-containing substances based on the number of grams of sugar in a particular substance. In a number of my commentaries on the soda tax I have suggested that it was designed as a revenue raiser. And now we have the proof.

According to this Philadelphia Inquirer story, “Mike Dunn, a spokesperson for Mayor Jim Kenney, said the health benefits of Philadelphia’s tax ‘have always been secondary to the primary goal’ of funding important city programs.” Wow. For quite some time, Kenney and other advocates of the soda tax have claimed that they proposed the tax in order to improve the health of people living in Philadelphia. As I, and others, have repeatedly emphasized, if reducing sugar consumption was the primary motivation for the tax, it would have been, should have been, and could have been, applied to all foodstuffs and beverages containing sugar. That approach, of course, would permit reduction of the tax to a level that would not have the adverse financial impact on businesses and consumers that the existing soda tax has caused.

And now comes news of a a study that suggests a better way to combat obesity and its attendant health problems: put a tax on “high sugar snacks” rather than simply on sugar-sweetened drinks. The study was conducted in the United Kingdom but surely the results would be the same if conducted in the United States. The researchers discovered that “high sugar snacks . . . make up more free sugar . . . intake than sugary drinks.” So I was on the right track with my suggestion that the “soda tax” should have been, and should be, a “sugar tax.” There’s a difference. As the researchers concluded, “Reducing purchases of high sugar snacks therefore has the potential to make a greater impact on population health than reducing the purchase of sugary drinks.”

The researchers determined that a tax on “high sugar snacks” would reduce a person’s weight by an average of 1.3 kilograms (almost 3 pounds) over a year. In contrast, the soda tax reduces a person’s weight by an average of just 203 grams over one year (less than half a pound). That’s a six-fold difference.

The researchers suggest that taxing “high sugar snacks” is something "worthy of further research and consideration as part of an integrated approach to tackling obesity." They point to the fact that their study lasted only one year, though they are confident that running a similar study over a longer period of time would not generate different outcomes.

What is particularly annoying about the soda tax is that its advocate fail to address the questions I, and others, have raised about its scope and effectiveness with respect to obesity. Now that a study confirms that obesity involves more than sugar-sweetened beverages, perhaps the advocates of soda taxes can refine their thinking and legislators at every level can go back to the drawing board.

So the Soda Tax Really Was About the Revenue and Not So Much About Health

One of my several criticisms of the soda tax is that it singles out certain liquids that contain sugar, and ignores other sugary substances. I have been writing about the flaws of the soda tax for more than a decade, beginning 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, Updating Two Tax Cases, When Tax Revenues Are Better Than Expected But Less Than Required, The Imperfections of the Philadelphia Soda Tax, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, Was the Philadelphia Soda Tax the Product of Revenge?, Did a Revenge Mistake Alter Tax History?, What’s More Effective? Taxing and Restricting Soda or Educating People About Healthy Lifestyles?, If Sugar Is Bad And Is Going To Be Taxed, Tax Everything That Contains Sugar, and Time for a Salt Tax to Replace a Soda Tax?

Another, related, concern that I have about the soda tax is that it is premised on the claim that it is designed to improve people’s health, yet it is not applied to any food or beverage that is unhealthy other than sugar. So is sugar the prime cause of bad health? According to a recent study, reported in this article, the answer is no. I wrote about that flaw of the soda tax in Time for a Salt Tax to Replace a Soda Tax?

Another concern, to which I’ve not given much attention, is the inequity of taxing sweetened beverages based on the number of ounces in the beverage rather than the amount of sugar. If the primary goal of the soda tax is to reduce sugar consumption, then even aside from the failure to tax solid forms of sugar, the tax should reflect the amount of sugar in the drink. Some sugary beverages contain twice or three times the sugar in a given number of ounces than do other sugary beverages.

All of these concerns, along with the silliness of taxing some items that are healthy despite having some sugar content, have contributed to my conclusion that the soda tax is designed for revenue production rather than health benefits. Taxing beverages is much easier than taxing all sugar-containing substances based on the number of grams of sugar in a particular substance. In a number of my commentaries on the soda tax I have suggested that it was designed as a revenue raiser. And now we have the proof.

According to this Philadelphia Inquirer story, “Mike Dunn, a spokesperson for Mayor Jim Kenney, said the health benefits of Philadelphia’s tax ‘have always been secondary to the primary goal’ of funding important city programs.” Wow. For quite some time, Kenney and other advocates of the soda tax have claimed that they proposed the tax in order to improve the health of people living in Philadelphia. As I, and others, have repeatedly emphasized, if reducing sugar consumption was the primary motivation for the tax, it would have been, should have been, and could have been, applied to all foodstuffs and beverages containing sugar. That approach, of course, would permit reduction of the tax to a level that would not have the adverse financial impact on businesses and consumers that the existing soda tax has caused.

Time for a Salt Tax to Replace a Soda Tax?

One of my several criticisms of the soda tax is that it singles out certain liquids that contain sugar, and ignores other sugary substances. I have been writing about the flaws of the soda tax for more than a decade, beginning 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, Updating Two Tax Cases, When Tax Revenues Are Better Than Expected But Less Than Required, The Imperfections of the Philadelphia Soda Tax, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, Was the Philadelphia Soda Tax the Product of Revenge?, Did a Revenge Mistake Alter Tax History?, What’s More Effective? Taxing and Restricting Soda or Educating People About Healthy Lifestyles?, and If Sugar Is Bad And Is Going To Be Taxed, Tax Everything That Contains Sugar.

Another, related, concern that I have about the soda tax is that it is premised on the claim that it is designed to improve people’s health, yet it is not applied to any food or beverage that is unhealthy other than sugar. So is sugar the prime cause of bad health? According to a recent study, reported in this article, the answer is no.

According to the study, the risk factor responsible for more deaths than any other risk factor is poor diet, and not smoking or high blood pressure. Yet poor diet isn’t so much the intake of sugar, red meat, and other unhealthy foods, but the combination of too much salt intake and insufficient amounts of whole grain, fruits, nuts, and seeds in diets. Examining 15 dietary risk factors, the study determined that in the five most populous countries, high salt intake was the most culpable in two of the countries, and insufficient intake of whole grains was insufficient in the other three countries. Where did high intake of sweetened beverages come in? Eighth in Brazil, eleventh in the United States, and thirteenth in China, India, and Indonesia. The only two factors in those three countries that contributed less to poor health, and premature death and disability, were high intakes of red meat and processed meat. In the United States, the only four factors contributing less to poor health, and premature death and disability, were insufficient intakes of calcium, milk, and polyunsaturated fatty acids, and too high of an intake of red meat.

So, as bad as sugar is for one’s health, there are other substances that play a bigger role in contributing to poor health. If the goal of the soda tax advocates truly is promoting health, and not just revenue raising, then the logical approach would be to tax the substances that contribute to poor health. What would make much more sense is a tax that applied not only to all items containing sugar, and not just liquids containing sugar, but also to red meat, processed meat, and items containing salt, trans fat, or both. And one of the places that at least most of the revenue should be directed would be credits for purchasing, or grants to reduce the prices of, whole grains, fruit, nuts, seeds, vegetables, legumes, milk, and items containing omega-3, fiber, polyunsaturated fatty acids, and calcium. This approach would permit a much lower tax rate, to the point where its application to sugary beverages would not raise such an outcry from some of those who oppose the soda tax.

Whether such a tax makes sense is a different question, and one that ought to be addressed before the issue of a tax’s scope is considered. Should a government use its taxing power to affect what people eat? Some would say, no, there’s no need for a nanny state. Others would point out that when people eat unhealthily, they put at risk not only themselves, but those who depend on them for support that ends when the unhealthy person dies or becomes unable to work, on the emergency services facilities and personnel who must respond to their crises, on the governments that must pay for the costs imposed on society by increases in unhealthy living habits, and on the health care system. If government takes no role in dealing with what people eat and drink, even aside from regulation of food growers, processors, and manufacturers and restrictions on driving under the influence, then perhaps it ought take no role in any other aspect of the consequences of eating and drinking. Of course, that outcome would eventually destroy society. When historians and others compare the decline of the Roman Empire with what is perceived as the decline of the United States, does societal health, aside from the lead poisoning theory, get much attention? It’s not as glamorous as the other factors, but perhaps it can be instructive.

And before discarding the notion of a tax on salt, consider this lead from the United Kingdom Salt Association: “Salt was frequently a source of taxation in ancient times and historically has probably been the most taxed commodity.” Salt taxes have also sparked protests, violence, and war. But so, too, has every other sort of tax. If compelled to choose between a soda tax and a salt tax, which would you choose?

If Sugar Is Bad And Is Going To Be Taxed, Tax Everything That Contains Sugar

The debate about the soda tax shows no sign of easing up. I have commented many times on the soda tax, including 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, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, Was the Philadelphia Soda Tax the Product of Revenge?, Did a Revenge Mistake Alter Tax History?, and What’s More Effective? Taxing and Restricting Soda or Educating People About Healthy Lifestyles?.

A few days ago, as reported in this Philadelphia Inquirer article, among others, the American Academy of Pediatrics issued a statement in which it identified “sugar consumption among children and adolescents as a “grave health threat.” My guess is that no mention was made of sugar consumption by adults because adults are not the focus of pediatricians. The Academy also encouraged legislatures to “consider taxes on sugary drinks as a way to reduce consumption.” It praised the Philadelphia soda tax not only because it taxes beverages but also because of the use to which the revenue is put. Yet the statement noted that, “If the tax revenue is allocated to decrease health disparities or provide other services that promote health in these specific groups, the tax ultimately may be progressive.”

There are three aspects of the Academy’s statement that are troublesome. In all fairness, the Academy is not alone in taking illogical positions with respect to the soda tax debate.

If the concern is sugar consumption, then the tax should be on sugar consumption and not just on some items that contain sugar. Though it is true that soda consumption accounts for a substantial source of sugar, the sugar in pies, cookies, cakes, ice cream, candy, and a long list of other foodstuffs is just as dangerous as is the sugar in soda. Worse, as has been pointed out time and again, the Philadelphia sugar tax applies to items that are not a health threat and even essential to good health. Logically, a tax on sugar is different from, and needs to extend beyond, soda.

Using soda tax or sugar tax revenue to educate people about good nutrition and to “decrease health disparities” makes sense. It is consistent with treating a soda tax or sugar tax as a type of user fee. Using soda tax revenue to fund programs that are not connected to these goals is just another example of finding revenue by focusing on the easiest items to tax.

If the concern is about the health of children, to say nothing of people generally, then the focus on sugar distracts from, and even implies acceptance of, the consumption of other items that are unhealthy. Substituting water or vegetable juice for soda in a meal filled with fried foods, red meat, pesticide-infested foods, and all sorts of non-beverage desserts might reduce some health problems in some people, but doesn’t make much of a dent in the obesity and other health epidemics afflicting the nation. There are many people who suffer serious health problems but who don’t, and for years and decades haven’t, consumed soda and other sugary beverages. Fixing nutrition issues requires more than slapping a tax on certain beverages. If the tax were applied more broadly, to all foods and beverages that contribute to health problems, the impact on any particular item would be much lower and less likely to generate opposition.

What’s More Effective? Taxing and Restricting Soda or Educating People About Healthy Lifestyles?

It’s soda tax time again! This is an issue on which I have commented many times, including 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, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, Was the Philadelphia Soda Tax the Product of Revenge?, and Did a Revenge Mistake Alter Tax History?

Recently, reader Morris asked me, “What is your opinion on the 5 new bills in California to reduce soda intake?” He pointed me to an article describing those five proposals. One, of course, involved taxes, and it simply is a replication of the “sugary beverage” taxes enacted in Philadelphia and some other localities that pose more problems than they provide solutions. The other four proposals also pose more problems than solutions. Those four other proposals are to reduce unsealed soda container sizes, print warning labels on sugary beverages, remove sugary beverages from checkout lanes, and stop soda companies from offering promotions to retailers.

Rationales for these ideas, though appearing to be sensible, distract attention from a wider problem. The problem is the inability or unwillingness of many Americans to eat and drink and live in a healthy manner. Though sugary beverages presumably are the primary source of sugar consumption, and though excessive sugar consumption can trigger a variety of health problems, focusing on sugar while ignoring all the other unhealthy foods and beverages, to say nothing of unhealthy lifestyles, is not unlike enacting restrictions on drone use by people of a certain age while ignoring misuse of drones by those in other age groups simply because there is somewhat more abuse of drones by people in that certain age group.

When a problem exists, focusing on one cause while ignoring all others is foolish and ineffective. If a house is insufficiently insulated, does it make sense to put in energy-efficient windows while ignoring the lack of attic insulation? If the nation is to become healthier, it will take much more than restrictions on the consumption of sugary beverages. Advocates will claim that restrictions on soda are “a start,” but that’s like locking one door while leaving the others open. As I’ve asked in the past, where are the restrictions on food and beverages that are no less damaging in the long run that soda consumption? What about the excess consumption of donuts, pies, and cakes? Or fast food? Or food tainted with pesticides or that are genetically modified? Perhaps in light of the adverse health effects of red meat and fatty foods, when will there be a focus on sales of bacon?

The flaw in focusing on a “soda tax” is demonstrated by the reach of the Philadelphia soda tax. It doesn’t reach a variety of foods containing high amounts of sugar. Yet it applies to beverages that contain relatively small amounts of sugar and that are in other respects much healthier than cakes and pies. There are plenty of people who drink soda but who are in great shape, and there are too many people who don’t drink soda but who suffer from serious health problems caused by the ingestion of foods and beverages that the soda tax advocates ignore.

So what do I think makes more sense? Being a fan of education, I certainly support putting warnings on dangerous things, including dangerous foods and beverages, though realistically I realize that warnings don’t deter everyone. But health education needs to be more than warning labels. It needs to be emphasized in the K-12 schools. It needs to be powerful. When supporters of warning labels attribute the decrease in tobacco smoking to those labels, they overlook two things. That decrease has been accompanied by an increase in vaping, despite warnings. And what I think worked are those television public service announcements showing the impact of smoking on individuals, who describe life using an electrolarynx or dealing with a throat stoma. Surely similar public service announcements can be crafted to show the dangers not only of excessive intake of soda but of ingesting unhealthy foods, failing to exercise, and omitting healthy life routines. Forcing people to live healthily doesn’t work, has never worked, and will not work. Encouraging people, through education in schools, intense public service announcements, and warning labels, can work, if it is honest and sensible.

Did a Revenge Mistake Alter Tax History?

The Philadelphia soda tax saga, like some other topics I have addressed over the years, is a tale that does not seem to have an end. I have written about the tax 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, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, Unintended Consequences in the Soda Tax World, and Was the Philadelphia Soda Tax the Product of Revenge?.

The last post in that series examined the claims that union leader John Dougherty and City Council member Bobby Henon pushed for the soda tax in an effort to punish the Teamsters Union. Dougherty allegedly was angry with the Teamsters union for a television ad it had run that put Dougherty “in a negative light.” The ad suggested that Dougherty and Jim Kenney, running at that time for the mayor’s office, which he won, “supported police brutality.” Now, according to this Philadelphia Inquirer report, it turns out that the Teamsters did not arrange or pay for the attack ad. It was the Carpenters union that sponsored the ad, funded by an outfit called Leadership Matters, Inc., which “registered in Pennsylvania a week before the ad aired, just before the May 2015 primary.”

Why would Dougherty make a mistake in identifying who was behind the ad? Both the Teamsters union and the Carpenters union were supporting a different candidate in the mayoral primary, opposing Jim Kenney who was supported by Dougherty. It is understandable that someone would be confused about who is behind a political campaign ad, because national and state election laws, and judicial opinions, have created an environment in which the actual force behind the ad can hide behind a screen of multiply-layered organizations that pop up just before and disappear just after and ad or series of ads. On the other hand, without solid evidence of who is behind an attack ad, reacting to the ad needs to be delayed until that evidence can be ascertained. And, even if the actual identity is known, taking revenge by pushing for a tax that harms individuals not connected with the attack ad controversy isn’t a good long-term strategy. That the tax generates revenue that is put to good use does not in and of itself justify the tax nor the process, or particular elements of the process, that leads to its enactment.

Now, with the soda tax continuing to be the focus of intense political debate, the upcoming election season in Philadelphia is certain to be even more heated than elections in Philadelphia usually are. For those not familiar with Philadelphia politics, election season is always very heated. Though sometimes tax issues get a good bit of attention during a Philadelphia campaign, this time a tax issue might be taking center stage. Charges and denials about the origin of the soda tax are going to be flying in every direction. So guessing an answer to whether this is my last commentary on the Philadelphia soda tax should be easy, barring something taking me out of the blogging circuit.

Was the Philadelphia Soda Tax the Product of Revenge?

Last week, when the U.S. Attorney’s Office issued an indictment of eight individuals, as described in this report, among others, I didn’t dig into the details. But then another report appeared that caught my eye. I saw the phrase “soda tax.” What’s THAT about?

As readers of this blog know, the soda tax has been the subject of posts since 2008. I have written about its flaws 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, When Tax Revenues Continue to Be Less Than Required, How Much of a Victory for Philadelphia is Its Soda Tax Win in Commonwealth Court?, Is the Soda Tax and Ice Tax?, Putting Funding Burdens on Those Who Pay the Soda Tax, Imagine a Soda Tax Turned into a Health Tax, Another Weak Defense of the Soda Tax, and Unintended Consequences in the Soda Tax World. Thus my interest in this bit of news.

It turns out that two of the indicted individuals, electricians union business manager John Dougherty and City Councilman Bobby Henon, who were significant advocates for the Philadelphia soda tax, allegedly pushed for enactment of the tax in an effort to punish the Teamsters union. Dougherty allegedly was angry with the Teamsters union for a television ad it had run that put Dougherty “in a negative light.” The indictment claims that Dougherty told another union official, “Let me tell you what Bobby Henon’s going to do, and he’s already talked to [elected local public official]. They’re going to start to put a tax on soda again, and that will cost the Teamsters 100 jobs in Philly.” It also claims that when a member of the mayor’s administration started to explain why the soda tax would be good for the city, Dougherty replied, “You don’t have to explain to me. I don’t give a f—. Listen, my goal is to make sure you are alright, that’s all.” Allegedly, Dougherty and Henon stayed in touch during the time the soda tax proposal went through the legislative process. Some commentators consider the allegation as fuel for increased opposition to the soda tax from the beverage industry. It seems that the Teamsters union would also be aggravated by the disclosure, considering it has opposed the tax from the outset. Worse, the indictment alleges that Henon, a member of City Council, pushed for the tax as “part of a corrupt bargain he struck with Dougherty in exchange for a $73,131 salary from Local 98 and tickets to sporting events worth $11,807.”

The mayor of Philadelphia, Jim Kenney, explained, “It may have been a revenge plot by Local 98, but it wasn’t to do with me.” He claimed that his finance director suggested a soda tax shortly after he was sworn in as mayor. The soda tax had been proposed and rejected during the term of his mayoral predecessor. Kenney and Dougherty have known each other since childhood, went to school together, and have been active in Democratic politics in the city for a long time. Henon, in the meantime, denied any wrongdoing.

Several days later, two members of the Kenney administration issued a reply. Essentially, they repeat the mayor’s claim that the idea for the soda tax originated with the finance director and that Dougherty had nothing to do with it. They explain that the discussion started with a recognition of the city’s need for revenue to fund pre-K, rehabilitation of parks, recreation centers, and libraries, and other projects. They claim that they had no knowledge of Dougherty’s alleged effort to harm the Teamsters union until the indictment was released. They claim that “the tax was the result of creative thinking around improving education for our children and economic development in our neighborhoods.” After not finding money in the budget because they didn’t want to make more spending cuts in other programs, they considered new revenue sources. They claim that they “reviewed multiple options to raise new revenues,” but they do not identify those options, Instead they “decided to pursue the beverage tax because it provided the necessary revenues, it would not negatively impact other revenue sources needed to fund the School District of Philadelphia or other city services, and the reduced consumption of sweetened beverages has other health benefits that benefit Philadelphia.” A tax on donuts, candy, pies, cakes, fried foods, or other unhealthy food items would also raise revenue and have health benefits. Would such taxes harm the Teamsters union? I don’t know. Were such taxes among the “multiple options”? I don’t know. It seems to me that more information about the origin of the soda tax would be helpful and arguably necessary. Of course, these city officials point out the benefits generated by the revenue raised by the soda tax, but the same benefits arguably would be generated by a lower tax on a wider array of unhealthy foods and beverages.

It remains to be seen what actually transpired behind the scenes. My guess is that a multitude of factors were at play, and not all of them were as noble as the soda tax advocates would want us to believe.