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Sunday, May 1, 2016

Philadelphia soda tax

The Pennsylvania primary election likely brought nationwide attention to Philadelphia's effort to create a soda tax. The tax aims to raise money for schools (see this 4/8/16 NPR story). It was also mentioned by at least Senator Sanders (he opposes) and Secretary Clinton (she supports).

Using principles of good tax policy, I oppose. Why?

Equity - This is a consumption tax and is regressive. That is, it has a bigger impact on low-income individuals than higher income individuals. The argument that it is taxing something "bad" is no excuse.  There are many bad things, why single out one item?

Neutrality - The tax law is not supposed to be affecting our decision-making. Taxes are intended to raise money for the government operations. If there is not enough money for schools, then spending or existing taxes should be changed. Senator Sanders was asked on Meet the Press if based on his reasons for opposing the soda tax he also opposes tobacco taxes. He answered no because tobacco causes cancer. (Huffington Post, 4/24/16).  That is a poor argument.  Tobacco taxes are also regressive and not all people who smoke (or are exposed to second-hand smoke) get cancer. Also, there are other ways to address these health concerns besides taxes. What about public health campaigns to educate consumers?

Economic Efficiency - Why tax just one type of sugar item?  Why not also candy? The tax will affect the marketplace by making soda a less attractive than other consumables.

Simplicity - A new tax will require new regulations and forms. The definitions and compliance will add more complexity to the tax system.

Appropriate Government Revenues - Education is a general fund expenditure and one of the key ones for state and local government. It should be funded by general fund revenues, not by special revenues. What happens when soda consumption drops and there is less money for the new education programs to be funded with this tax? Education funding should not be dependent on a special tax.

And, this is not a new issue.  I blogged on it in 2010 - 3/13/10 blog post.

What do you think?

1 comment:

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