How hard would Kenney’s tax hit soft-drink consumption? Views differ

Posted: March 15, 2016

Mayor Kenney's administration expects to see a 55-percent drop in consumption of sugary drinks in the first year should its controversial taxing plan be approved.

That is far lower than the sales drop-off estimated by the soda industry - a staggering 79 percent.

Those differing projections, one of many economic factors the two sides diverge on, also lead to considerably different revenue projections for what is the first major proposal of Kenney's tenure.

His administration, in new revenue projections released Monday, says the tax would reap $432 million over five years.

The soda industry totals the revenue at $279 million.

The split is important, considering the long list of projects Kenney hopes the tax will fund - including unversal pre-kindergarten.

The 3-cents-per-ounce tax would apply to sugary drinks, but not diet beverages or 100-percent fruit juice.

The 55-percent drop in sales anticipated by the city aligns with a 55-percent estimated jump in prices. Because the tax would be levied on distributors - not at the point of sale - it is not yet clear how much of that increase would be passed on to the consumer.

Rob Dubow, the city's finance director, also said he expects sales will increase in other areas.

"We assume people will move over to other products," he said.

Dubow on Monday also acknowledged a mistake in the soda tax legislation, introduced to City Council earlier this month, that results in a higher proposed tax on fountain soda than on bottled or canned drinks.

The Inquirer on Friday reported that while the administration has described the plan as a 3-cents-per ounce tax, it would actually tax fountain soda 50 percent higher, at 4.5 cents per ounce.

Dubow said the Kenney administration, as a starting point for its bill, used one drafted by Mayor Michael Nutter's administration. Dubow said he does not know why that bill included the higher rate for fountain soda but that the error was a "holdover from the old legislation" and was not caught before Friday.

"Really, it's just something we didn't pick up as we worked off the legislation that we had," he said. "And now we'll work to correct it."

Dubow was a member of Mayor Nutter's cabinet when Nutter twice proposed a soda tax.

Asked if he knew Nutter's legislation also included the higher rate for fountain soda, Dubow said he did not.

"No," he said. "If I was I would have changed it."



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