Passing Philly soda tax to consumers = a $32 million windfall for PA & the city

Updated, 11:15 a.m., January 13

The City of Philadelphia is cashing in on the soda tax, and not just from the 1.5 cents per ounce it’s charging distributors.

Many buyers of these drinks since Jan. 1 have dealt with two price increases: Stores passing through the 1.5-cent-per-ounce soda tax levy and, secondly, a higher sales tax because of the increased soda cost.

That higher amount of sales tax means Philadelphia and the state are due a significant windfall. Based on how many sugary drinks the city expects us to consume over the next five years, the state will make an extra $24 million and Philadelphia an extra $8 million if the entirety of the soda tax is passed on to consumers.

That might seem like a lot given we’re talking 1.5 cents per ounce and a 12 oz. soda can normally sold for $1 is now going for $1.18. But here’s how it adds up:

Over the next five years, the Mayor’s Office is projecting it will make $400 million in soda tax revenue by charging distributors 1.5 cents per ounce on every sugary beverage — soda, diet soda, sports drinks, fruit juices with added sugar, etc. That would essentially mean the city expects Philadelphia residents and visitors to consume a total of about 26.6 billion ounces of sugary beverages the next five years, or the equivalent of about 2.2 billion 12 oz. cans or 208 million gallons.

Let’s stick with the cans to do the math, even though the price changes in gallons are far more obvious. Without a 1.5-cent-per-ounce soda tax passed through, those $1 12-oz. cans would lead to $2.2 billion in sales.

The sales tax in Philadelphia is 8 percent. Six percent goes to the state and 2 percent goes to the city. So Harrisburg would get $132 million off regular-priced sugary beverages and Philadelphia $44 million in five years.

Here’s how the 1.5 cents extra per ounce makes a difference if it gets passed through to the consumer, as grocery stores in Philadelphia have been tabbing up on their receipts: The $1 can is now $1.18. And sales tax is added to that higher total. So the 2.2 billion cans sold over five years jumps to about $2.59 billion in sales. Harrisburg would now get just under $156 million, for an extra $24 million. Philadelphia would get about $52 million, for an extra $8 million.

Would Philly sales tax revenue attributed to the soda tax would go to programs like pre-K or Rebuild? There aren’t any plans. The Mayor’s Office said the Department of Revenue determined such a bump would be negligible because of a decline in soda consumption.