May
26
Soda Taxes Hurt the Poor and Don’t Work
“Sin tax proponents have shifted gears by arguing that taxation is mainly aimed at compensating society for the drains sinners impose on the public healthcare budget and reducing the harm consumers do to themselves. With this new push, the limits of what defines a sin steadily are being expanded.” — “‘Sin Tax’ Costs Outweigh Benefits” by Hoffer, Shughart, & Thomas, at U.S. News
Some politicians just can’t help but stick their fingers into areas of our lives where they have no business being. (Tell you something you don’t know, right?) They’ll say it’s for our own good and may even list several reasons that sound positive on the face of it. It might involve something relatively insignificant in our lives, so we think, “What could it hurt?” But, if politicians want to influence or control it, you can bet they have a questionable agenda, and the repercussions will likely be less positive than they project — and quite possibly negative.
Want an example? In the early days of this blog, I wrote about several attempts at the city, state, and national levels by “well-meaning” politicians who proposed a “sugar tax” or “soda tax”. The idea was that, by adding this “surcharge” onto the prices of sodas and other sugary drinks (and, in some cases, foods), it would discourage the consumption of such unhealthy products, as people would balk at the higher prices and opt for healthier snacks. Result: healthier residents. Proponents — e.g., mayors, governors, senators — also touted the tens of millions of dollars that would be raised by these new taxes and dedicated to things like “public health services, including community health centers, dental care, and violence prevention.”
Question: How exactly is such a tax policy going to produce all that extra cash, if it is also supposed to discourage people from buying so much of the products in question?
As a few of these measures passed over the ensuing years, more people started to take notice. One helpful article appeared at The Daily Signal in Nov. 2016, in which Daren Bakst wrote a commentary echoing concerns I had, as well.
“Soda taxes are a dangerous idea that demonstrate the willingness of some people to trample on individual freedom. These taxes, first and foremost, are efforts to limit our ability to make our own personal dietary decisions….
If this attack on freedom isn’t bad enough, soda taxes are regressive in nature and hurt the poor more than anyone else. Lower-income individuals and families spend a greater percentage of their income on food compared to those at higher income levels. They may even pay more in real terms as well.
Frequently, these types of intrusions into personal dietary choices are criticized for being nanny state policies. That’s true, but the reality is even more insidious.
There are some “elitists” who simply think they are smarter than most people and want the masses to comply with what they deem is appropriate behavior. These taxes don’t hurt them because they are less likely to drink the sugar-sweetened beverages. They also have the money to pay the higher prices for these beverages.
As for the cities, these taxes are a great way for them to bring in more money, often helping to secure revenue to offset their financial mismanagement or grow government even more.”
Precisely!
One of the places that implemented such a policy was Philadelphia, PA. The city council finally passed a measure in June 2016 to add a 1.5 cent-per-ounce tax on sugary and diet beverages, which went into effect in Jan. 2017. (Mayor Jim Kenney had been pushing for 3 cents-per-ounce.) They had to give up promoting it as a matter of public health, since they couldn’t convince either the public or scientists. So, they admitted the purpose of the tax was to raise revenue for projects like universal Pre-K. The particularly rosy projections were $91 million per year!
Within 2 months of Philly’s soda tax going into effect, Pepsi announced that it would be laying off 80-100 workers at three distribution plants (which are run as independent businesses) that serve the city. Why? The soda tax had already cut Pepsi’s sales in the city by 40%. Now, after 2+ years, thanks to a study published in the Journal of the American Medical Association (JAMA), we have a more complete picture of the results.
As reported by CNN,
“In the wake of the tax, sales on those beverages dropped by a whopping 51% in the first year…. [But,] beverage sales in nearby towns and counties without the tax went up. That suggests people may have been traveling to get their soda at a reduced price.”
Well,… who could have predicted that?!!! <<raises hand>>
As Hot Air‘s Jazz Shaw writes,
“Wonders never cease. People stopped buying their soda in the city (and almost undoubtedly a lot of other shopping list items) and decided to shop where prices were lower. The study they reference also goes on to note that there was no corresponding increase in sales of bottled water or healthier beverage options. [Italics added.] And as for the revenue question? They don’t even delve into that, but you can do the math easily enough. The tax on soda increased by 17%, but the sales fell by 51%….
Great job, guys. You gutted your revenue stream, caused layoffs in the beverage industry and depressed sales in the city’s retail outlets, likely impacting entry level jobs…. The same thing happened in Chicago. It happened again in Seattle. And it nearly happened in several more California cities until the governor was forced to agree to a ten year moratorium on new soda taxes.”
(from 2010)
The Daily Wire‘s Amanda Prestigiacomo quotes Philly.com regarding another impact on local workers,
“And last month, the local outlet reported that the owner of Acme Markets, who has 16 stores in Philadelphia, had to cut employees’ hours because of the tax: “The beverage tax fell on about 4,000 items. In Acme city stores, soda sales dropped as much as 80 percent. Sales of other items covered by the tax, such as juices, creamers and energy drinks, were down 30 percent, and the number of customers declined by 5 percent. Philly stores cut an average of 150 to 200 employee hours per week, resulting in lighter paychecks for employees.”
Just a little soda tax for the good of the people? No thanks!
Oh, in case you were wondering who was implementing these stupid tax laws that backfire and cause more problems… Hint: it ain’t conservative Republicans.
