If it was a “meat tax” Mayor Jim Kenney had pushed through City Council and past a $600 million lobby, well, then Philadelphia restaurant owners would definitely be up in arms.
But it’s not beef or chicken that are subject to the new levy that went into effect on Jan. 1 — it’s soda and sugar-sweetened drinks.
Beverages like these make up a much lower percentage of overall sales for restaurants than they do for venues like convenience and grocery stores. And per an informal survey, it seems restaurateurs in the city aren’t worried about the new tax having an adverse affect on their bottom line — even those who haven’t yet raised prices to match.
That doesn’t mean they’re all happy about it.
“I paid $110 in soda tax this week,” said Phyllis Farquhar of Sketch Burger, noting that amount equaled a 19 percent hike in average weekly payouts to her beverage supplier.
Farquhar is passing the cost of the tax along to her customers. A new sign taped on the Fishtown burger joint’s fridge indicates the exact increase for each type of container (18 cents for a 12-oz. can, 30 cents for a 20-oz. bottle, etc.) Although she hasn’t heard any complaints from the 90 percent of people who get a drink with their order, she’s still not a fan of the move.
“They should just come out and say we need more money so we’re gonna go after small business,” she said. “It’s not government’s role to tax people under the guise of changing people’s behavior.”
Of course, conventional wisdom is that Mayor Kenney was successful in making Philly the first major US city with this kind of tax in large part because he didn’t focus on the public health aspect, but instead highlighted the new programs funds would make possible.
That made all the difference for Ken Silver, proprietor of South Street icon Jim’s Steaks.
Silver didn’t come out as for or against the tax when it was being debated — he didn’t sign the petitions either side pushed in front of his nose — but now that it’s law, he’s accepting of it.
“Taxes are the price we pay for living in a civilized society,” Silver said. “Assuming the taxes go for pre-K for kids that couldn’t afford to go, and other education programs… I think the programs are terrific.”
As for the business side of things, while he doesn’t raise prices on cheesesteaks when meat costs fluctuate — “Cheesesteak: Market Price,” he joked — the soda tax is different. His extra spending this week because of it was upwards of $140, and he’s increased prices the equivalent 1.5 cents-per-ounce where applicable.
“We couldn’t eat the 30 cents [per bottle], and the distributor didn’t eat the 30 cents, so the consumer is going to eat it,” he said. “Just like like cigarettes or alcohol or anything else.”
Even so, he doesn’t expect soda sales to decrease by much. If they do, he figures people will simply turn instead to water, which already outsells soda four-to-one at the 24-hour food counter.
That’s the prediction of Robin Barg, owner of brunch specialist Day by Day in Rittenhouse. She’s planning to pass on the increases directly for soda, bottled tea and sugared juices, but is also planning to order more non-sugared varieties of drinks.
“They are more expensive but at least people might find it more palatable,” Barg said. “I am skeptical about the tax helping to combat obesity (but hopeful) and I really hope the money does make it to the place to help the pre-schools.”
Spot Burgers’ Josh Kim also doesn’t expect sales to go down because he raised soda prices to match the new tax — “I don’t foresee much of a difference at all” — but he’s still what you might call “more than skeptical” about the whole situation.
“The soda tax is a ruse,” he wrote via email. “Under the guise of promising pre-K the city has yet again pulled the wool over our eyes and played the guilt card to pass this tax.
“Instead of educating people, the city believes in social manipulation via taxation. I believe this tax will lead to other sin taxes. Here are a few I believe will be passed in the next decade:
- Caffeine tax
- Snack food tax
- Beer wine spirit tax
- Bottled water tax
- Plastic bag tax
- Cake tax
- Prepared food tax.”
At the Vetri Family restaurants, where fountain sodas will increase by 25 cents at around half the different venues, there’s a much more accepting tone.
“While we’d prefer not to see anything increase in cost on the wholesale end, we do appreciate the Mayor’s intent, and that the money collected is set to go to noble causes,” says beverage director Steve Wildy.
One restaurateur who has not yet raised beverage prices due to the new levy is Steve Cook.
Of all the CookNSolo spots, fast casuals Dizengoff and Federal Donuts are most likely to be affected in some way, he said, but even at those venues, soda and sugared beverages account for low single digit sales, percentage-wise.
“If there was a meat tax,” Cook said, “we would probably be looking at it a little harder, but we’re not a convenience store. We’re taking more of a wait-and-see approach.”
At hummusiya Dizengoff, where cans of soda sell for $2 apiece, the 18 cents in additional tax cost represents a not-insignificant fraction of the profit margin, he noted, but instead of raising prices there he would most likely look to make it up somewhere customers are less likely to notice.
And even if he doesn’t, and profit drops ever so slightly, “it’s probably a good thing,” Cook said.
“If money makes it to the school district or for pre-K, to me that’s a huge positive that makes it worthwhile,” he said.
“We would all be a lot better off if we didn’t react to things based only on how they affect us. Sometimes we need to look at what’s better for everybody.”