Happy Anniversary Philly Tax–You Lost 1,192 Jobs & Slashed GDP by $80 Million!

Not all anniversaries commemorate happy events laden with purple prose and red roses. Some anniversaries force people to look at negative things and their very real consequences.

The anniversary of Philadelphia’s beverage tax, dropped on its citizens in January 2017 by political fiat not popular vote, can’t be celebrated. It can however serve as a warning for other cities foolish enough to believe this type of tax is “good” for residents.

Just a few short months after Philly pols implemented a 1.5 cent per ounce tax on all sweetened beverages—even those with no calories– retailers felt the bitter sting.

There were news stories featuring long time Philly grocers barely surviving on thin profit margins now stretched to the breaking point by dramatic and immediate declines in sales.

The arrogant response from Philly’s mayor and bureaucrats intent on “legislating” health choices through their tax code? Predictable. Lots of accusations that “big soda” and “big retail” were crying wolf. Sales were not going to stay down for long, people would adjust their spending habits and start making more “sensible” beverage choices just like good little mice in the government’s Skinner Box.

Only, none of those facile predictions came true. Instead, Philly saw significant job losses and tens of millions of dollars of economic pain on local businesses. Oxford Economics, a leading economic analysis firm, just released a study that used real numbers to track the damage in one year. (Full report here at https://goo.gl/hb3c7k )The numbers are staggering.

Using two separate proprietary datasets as well as public tax receipt data from Philly, Oxford Economics looked at sales of the three largest bottlers in Philly and same store supermarket sales data for Philly area supermarkets provided by Information Resources, Inc. They looked at datasets over the same period (January to mid-April) in 2016 and 2017 to get the direct economic hit of this tax and its ripple effects. In other words, this study was not conducted by amateurs and it was rigorous.

What did they find? A job loss of 1,192 workers, $80 million in lost GDP and $54 million less in labor income. The job losses broke out to approximately 70 percent from reduced non-beverage grocery retail, 25 percent from beverage trade and transport margins and 5 percent from bottling.

Bottlers’ sales plunged by almost 29 percent in Philly. Same-store supermarket beverage sales in the city fell by 24 percent while those outside Philly increased 14 percent. Sales of non-beverage items in the city’s supermarkets declined by 7 percent. Yep, yogurt sales dropped 10%, frozen veggies dropped 14% and fresh bread sales dropped 9% to name a few “regular” food items people stopped buying in the City of Brotherly Love.

How about the lofty prediction that the tax would force “healthier” choices? Nope. The study found that the tax only shifts consumption to untaxed substitutes with calories, namely powered drink mixes (sales up 29% in the city) and instant tea (sales up 32 % in the city). And stores outside the city did not see soaring powered mix sales. And no stores saw a spike in wheat juice sales.

So, instead of a card marking this anniversary, we have the study. And this is a “must read” if you are a mayor looking at a beverage tax— unless you want to raise unemployment, decrease your city’s GDP, close city supermarkets and hurt consumers. And then your friends might send you a sympathy card, but they’ll probably buy that in the suburbs.

Written by