The Philadelphia soda tax in supposed to bring in revenue for “free” pre-K, but the revenue keeps shrinking.
Philadelphia soda tax is being brought to the Pennsylvania Supreme Court. I have no idea why the court would rule against the tax, but the coverage is causing local media to look at the results of the tax.
And they are increasingly meager.
The Philadelphia Business Journal reports, “Ahead of high court hearing, report shows soda tax revenue sinking.”
The city’s monthly revenue collections show PBT brought in $5.8 million in January and $5.5 million in February. Receipts for each month are collected by the end of the following month. The $11.3 million total is about $817,000 less than the soda tax revenue generated in the same period a year ago, when the first two months of 2017 saw the Kenney administration buoyed by PBT’s strong start.
The revised yearly estimate of $78.8 million averages out to a monthly expectation of $6.5 million, an amount the Mayor’s Office exclusively told the Business Journal it will hit with March revenue.
A particularly snowy winter, including one of the snowiest months of March on record, could have contributed to weakened drink sales in 2018 since area schools, universities and some offices had closures.
$6.5 million in soda tax revenue in March 2018 would still be below the $7.0 million the tax raised in March 2017. It also would put collections for the first three months of 2018 at nearly $1.4 million less than January through March of 2017.
That […] means the pressure is still on the final three months of FY18 to meet the $78.8 million annual goal.
Why was the revenue lower than expected? Because the tax altered people’s behavior in other ways than what the “experts” predicted.
The Zero Hedge blog reposted the story at the Political Calculations blog: “Philly Soda Tax Is Underperforming Lowered Expectations.”
Starting with the observation that Americans consume the lowest quantities of the kinds of beverages that are subject to Philadelphia’s soda tax during the first quarter of every year, we think that Philadelphia’s revenues from its controversial tax were relatively elevated in the first three months of 2017 compared to 2018 because Philadelphians hadn’t yet fully worked out all the strategies that they would come to employ to avoid paying the tax back when it first went into effect. Soda tax hacking strategies that included buying beverages that would be subject to the tax outside of the city or buying packets of sugary drink mixes that were not taxed by the city and making their own sugar-laden beverages.
By the second quarter of 2017 however, many Philadelphians had become adept at avoiding the tax, where the monthly tax revenue figures from April 2017 onward would be reasonable projections for the amount of revenue that would be likely to be collected over the remainder of 2018, aside from unique factors that may affect beverage sales and the corresponding tax collections, such as abnormally hot or cool weather conditions.
So, in addition to the possibility that the tax may be abolished by the state Supreme Court or the state legislature, the tax simply isn’t going to produce the expected revenue.
One issue that has been resolved however is which purported beneficiary of Philadelphia’s beverage tax would “get stiffed” should city official accept the reality that the tax would not produce the revenue they had promised it would. The designated loser turned out to be Philadelphia Mayor Jim Kenney’s “Rebuild” initiative to improve public parks, libraries and other city infrastructure, which has been dramatically scaled back from promised investments.
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