Winners and losers unclear in first month of roll out
(Photo Left) Tallying up the soda tax. Photo by Salvatore Patrone.
When Philadelphia became the first big city in America to pass a soda tax, we knew the city’s revenue department and beverage associations across the nation would be poring through the first returns in order to claim victory or defeat.
Last month, the city released the numbers and, as you might expect, there is a little something for everyone in them.
What is not in dispute is that the tax — $5.7 million in revenue in its first month of implementation — has caused a drop in the purchase of sugary drinks in Philadelphia. Billypenn.com did an analysis of the city’s data and concluded the following: “… if we’re comparing January to recent averages for Philadelphia, soda consumption went down by about 40 percent. According to the Health Department, Philly consumes 7.68 billion ounces of sugary beverages a year, or 640 million ounces a month. The 380 million ounces is about 40 percent less than that average.”
There can be little doubt that Philadelphians are consuming less sugar, and that has to be good for the overall health of the city’s populations.
The economics of the sugar tax, on the other hand, is a lot less clear.
While the revenue numbers are significantly higher than the city’s projections for the ramp up of the soda tax — more than twice $2.3 million the city had projected for the same period — the question remains why such a disparity exists at all. City spokesperson, Mike Dunn told philly.com, “The Budget Office’s projection of [$2.3 million] was intentionally conservative because this is a new tax, and it was difficult to determine the extent, if any, of issues that taxpayers would have in filing for the first month.”
But before the city starts patting itself on the back in reaching its goal of funding universal pre-K, there are some warning signs looming on the soda tax horizon. According to Philly.com reports, “[T]wo months into the city’s sweetened-beverage tax, supermarkets and distributors are reporting a 30% to 50% drop in beverage sales and — adding insult to injury — are now planning for layoffs.
One of the city’s largest distributors told the Philadelphia website it would cut 20% of its workforce in March, and an owner of six ShopRite stores in Philadelphia says he expects to shed 300 workers this spring.
The city predicted a 27% sales decline industry-wide as a result of the tax but early returns from some beverage sellers show far higher losses, fueling a resurgence of the anti-soda tax coalition that fought vigorously against the tax last summer.
Bob Brockway, chief operating officer of Canada Dry Delaware Valley, which distributes about 20 percent of the city’s soft drinks, said sales were down 45 percent in Philadelphia. The company will lay off 20 percent of its workforce the first week in March. The distributor is a subsidiary of Honickman Affiliates, owned by Harold Honickman, who helped lead the opposition to the tax last summer. The 35 jobs on the line include managers, sales people, and drivers, Brockway said.”
Of course, no mayor wants a tax that drives businesses away from the city so the mayor and his flaks were quick to respond:
“We have no way of knowing if their sales figures and predicted job losses are anything more than fear-mongering to prevent this from happening in other cities,” said city spokesman Mike Dunn.
Mayor Kenney characteristically was a bit more direct in an emailed statement: “I didn’t think it was possible for the soda industry to be any greedier … They are so committed to stopping this tax from spreading to other cities, that they are not only passing the tax they should be paying onto their customer, they are actually willing to threaten working men and women’s jobs rather than marginally reduce their seven figure bonuses.”
Over the next few months, the soda tax battle — one between universal pre-K and a healthier city on the one hand and job losses on the other — will be played out, as it should be: by the numbers. Anomalies and outliers will give way to fuller data sets and more thorough analysis. Then perhaps the amped up rhetoric on both sides will remain on the sidelines.