Sunday, June 19, 2016

Who is taxing soda and iced tea?

What city is going to tax soft drinks and other beverages?  New York City tried and failed to do this.  This week, the city of brotherly love, Philadelphia, decided to be not so friendly to soft drinks and other beverages.  The City Council passed a 1.5 cent per ounce tax on many beverages.   Doesn’t sound like much, but buy a 20 ounce soda and the tax would be 30 cents.  Want a 12 pack of sodas?  Then add $2.16 to your bill.  This doesn’t include the 8% sales tax that would be charged on that soda. 
What beverages are being taxed?
Sugary beverages including sugared sodas, sports drinks, Iced Tea like Snapple Iced Tea, lemonade, Gatorade, Energy Drinks like Monsters Energy Drink, Powerade Mountain Berry Blast would be taxed. Diet sodas like Diet Coke, Coke Zero are also taxed.  V8 Splash Carrot Orange Drink would be taxed as it is sweetened with high fructose corn syrup and contains only 15% juice.  Vitamin Water such as Glaceau Vitamin water – Fruit Punch will be taxed because crystalline fructose and cane sugar are added.
Do these “sin” taxes work?
Since 2014, Mexico has a 10% tax on sodas.  The hope was to curb the intake of sodas among low income and those who are obese.  But that hasn’t happened.  They kept buying their sodas.  In fact, although sales of sodas dropped at first they are now growing by 0.5%.  (Philadelphia OKs Bloomberg-backed soda tax)
Cornell did a study that showed people at first cut back on sodas that are taxed but after a while revert back and buy the sodas like they always did.
What beverages aren’t taxed?
Fresh fruit, or vegetables, unsweetened drinks.  So beverages like V8 Veggie Blend would not be taxed.
How will Philadelphia use this new tax revenue?
They estimate taking in $91 million a year from this new tax in 2017.  Monies will be used to fund educational programs such as universal pre-kindergarten. But some of the funds are to go to city employee benefits and pet projects of city council members.
Is a Beverage Tax Coming to Your City?
Other cities are eyeing this experiment so such beverage taxes may come to a city near you.  However, Philadelphia is expected to be sued by the beverage bottling industry so time will tell if the tax takes effect and if it does, how long it will last.   

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