The city’s finance director today acknowledged that Mayor Jim Kenney’s proposed soda tax would hit poor neighborhoods the hardest, a point made earlier by experts, one of whom called the tax “regressive” and “imperfect.”
Finance director Rob Dubow said during a budget hearing today that the administration hasn’t conducted a neighborhood-by-neighborhood analysis of how a sugary drinks tax would impact consumers, but Councilwoman Cindy Bass pressed him on the matter, asking specifically for the consumers of most sugary drinks.
“From everything we’ve seen, it’s in poor neighborhoods,” Dubow said, “which is where the advertising is targeted to.”
The first-year mayor has proposed a 3-cent-per-ounce sugary drink tax that would make Philadelphia the only major city in America to pass such a tax at all and it would be the highest sugary drinks tax in the country. Berkeley, Calif. is the only other city to pass such a tax where distributors pay a 1-cent per ounce tax.
Kenney’s proposed soda tax has plenty of opposition (read: Big Soda lobbyists), but it was introduced as an idea in order to help fund the new mayor’s ambitious budget plans, including implementing universal pre-K and establishing community schools.
His administration has repeatedly said the sugary drinks tax, if passed as is, would positively impact low-income communities because of the programming it would fund. It’s also pointed out that the sugary drinks tax would be levied on distributors, not directly on consumers.
Dubow said Tuesday that the city predicts distributors would eat some of the cost of the tax and pass on about half to the consumer, or 1.5 cents-per-ounce. A California-Berkeley study found that in the case of Berkeley’s soda tax, between 50 and 70 percent of the new tax was passed along to the consumer. If Kenney’s tax passed at 3 cents per ounce and 70 percent of the tax were passed on, a 12 oz. soda that now costs $1 would increase to $1.24.
Tuesday was the first time members of City Council were able to publicly question members of Kenney’s administration about the proposed tax. The mayor’s chief of staff Jane Slusser delivered testimony on the mayor’s five-year plan, reiterating that Kenney’s priorities are directly tied to the passage of the soda tax.
“We believe that taxing sugary drinks will provide the city with the necessary funding to deliver critical services,” she said, “without raising a broad-based tax that would be challenging for all residents and families across Philadelphia.”
Council President Darrell Clarke said during the hearing that he has concerns distributors won’t take on the amount of the tax the city is hoping they do and are more likely to pass it along to consumers. Councilwoman Blondell Reynolds Brown expressed similar concerns, asking Dubow what processes are in place to ensure the tax would indeed fall on the distributor.
Dubow said the city would add an additional $1.8 million into the Department of Revenue budget for implementation and enforcement of the new tax to make distributors compliant.
Additional hearings will be held regarding Kenney’s proposed budget throughout May.
Here are some other thoughts from council on the proposed tax: