NCPA - National Center for Policy Analysis


March 8, 2010

Facing a mounting deficit that could reach $500 million to $700 million over the next five years, Philadelphia Mayor Michael Nutter is getting creative.   Among budget cuts and various fundraising strategies, including charging a fee for trash collection, Nutter has proposed a tax on sweetened beverages such as soda, energy drinks and bottled teas, says AOL News. 

  • The tax would charge 2 cents per ounce of soda -- amounting to $2.88 per 12-pack of 12-ounce cans -- including fountain drinks but not diet drinks.
  • It is an especially appealing tax target for Philadelphia, a city where half of the children are considered obese.
  • According to the American Journal of Clinical Medicine, sweetened beverages account for 8 to 9 percent of the average American's caloric intake, and some hope that putting a tax on soft drinks could help curb the nation's rampant obesity problem.  

Audrae Erickson, president of the Corn Refiners Association, which represents the makers of the ubiquitous beverage sweetener high-fructose corn syrup, believes the tax will be unproductive and ultimately damaging. 

"Singling out certain foods or beverages for government penalization through tax policies will only serve to further confuse consumers, raise grocery prices at checkout, and will not lead to meaningful results in assisting Americans to adopt healthier lifestyles," she says: 

  • Chicago is the only major city that currenty taxes soda, but Nutter's new tax would be significantly higher.
  • Seven other states are considering similar legislation, but a soda tax proposed in the U.S. House Ways and Means Committee was voted down.
  • The mayor has called the proposal the "Healthy Philadelphia Initiative," but the Philadelphia Inquirer says "it's clear the city's first priority is to raise money."
  • City officials estimate the tax could raise $77 million annually.  

Some, however, argue that the tax will further damage Pennsylvania's already ailing economy, hitting Coke and Pepsi bottling plants in Philadelphia especially hard, says AOL News.  

According to the American Beverage Association spokeswoman Susan Neely:  "At a time when Philadelphians are struggling through a tough economy with double-digit unemployment rates, this tax will threaten 2,000 well-paying beverage industry jobs in the Philadelphia area, and its impact will reach beyond the beverage aisle, hurting Philadelphia grocers by driving sales outside the city limits." 

Source:  Dave Thier, "Philadelphia Mayor Calls for Tax on Soda," AOL News, March 4, 2010. 

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