The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.
March 9 — For a third time in six years, Philadelphia is considering a soda tax.
The city's new mayor is calling for a 3-cents-per-ounce tax on sugary drinks to pay for universal pre-kindergarten, new community schools, infrastructure improvements and extra payments to the city's struggling pension fund.
“We can give our citizens all of those things with just one tax,” Mayor Jim Kenney (D) told the City Council in his March 3 budget address.
Kenney's pitch for the new tax is straightforward: it would raise $400 million in new revenue over the next five years. The tax is the cornerstone of a proposed budget and five-year plan that calls for $265 million in spending on universal pre-K; $39 million for 25 new community schools; and a $26 million investment in the city's pension fund, which is underfunded by $5.7 billion.
None of that can happen “if we don’t pass a sugary drink tax,” Kenney said. “There is simply nowhere else to find this revenue.”
Kenney's predecessor, Mayor Michael Nutter (D), failed in 2010 and 2011 to pass a 2-cents-per ounce soda tax—with then-Councilman Kenney voting against it, saying that there were too many mixed messages about why the tax was needed.
Critics are already gearing up for a fight, saying the tax targets low-income citizens and minorities and would drive jobs out of the city.
“As we have twice in the past, Teamsters Local 830 will once again exhaust every resource available to us to defeat the new administration's proposed soda tax,” the union's Secretary-Treasurer Dan Grace said in a statement on the union's website, warning that the tax could endanger jobs for drivers at Coca-Cola Co. and PepsiCo. Inc.
The biggest challenge to the tax is likely to come from the beverage industry, said Jeff Niederdeppe, a communication professor at Cornell University and co-author of a recent study on public opinion on policies to reduce soda consumption.
In other cities that have tried to pass soda taxes, the industry has spent 20 to 30 times more than tax advocates to defeat the proposal, he told Bloomberg BNA March 9.
An increasing number of states and local governments have tried taxing sugary beverages in the last few years, but the measures have mostly failed .
The only other soda tax in the U.S. is in Berkeley, Calif., which taxes distributors a penny per ounce.
Kenney says “Big Soda” can afford to pay because it charges customers and distributors much more than what it costs to make the drinks. The tax wouldn't apply to diet drinks or bottled water.
Under the ordinance proposed March 3, the tax would be levied on distributors at 3 cents per ounce of soda or 27 cents per ounce of syrup. Sweetened beverages would include soda, sports drinks, flavored waters, presweetened coffee or teas and fruit drinks that aren't 100 percent juice. Sweeteners would include “any form of caloric sugar-based sweetener, including, but not limited to, sucrose, glucose or high fructose corn syrup,” the proposal says. The tax wouldn't apply to baby formula, milk-based products or unsweetened drinks that can be sweetened at the point of sale.
It isn't clear how much of the tax, proposed to be levied on distributors, would be passed on to consumers. In 2015, a study of Berkeley's 1-cent-per-ounce soda tax found that only 21.7 percent of the tax levied on distributors was passed on to consumers .
Budget hearings are scheduled to start March 29.
To contact the reporter on this story: Leslie A. Pappas in Philadelphia at firstname.lastname@example.org
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