Philadelphia's tax makes soda more expensive than beer, study shows



It may be cheaper for thirsty Philadelphians to reach for a beer than a soft drink, thanks to the city's so-called "soda tax," and that might not change anytime soon.

The latest study from the Tax Foundation, an independent tax policy research group, found the city's excise tax on sugary beverages has in some cases made drinks like soda more expensive than beer and that it may not be raking in the cash city officials envisioned. Soda revenues have lagged, and the shift has pushed some residents to leave the city to buy groceries, according to the study's authors.

The tax went into effect at the start of the year and slaps a 1.5 cents-per-ounce tax on sugary and diet beverages. That's 24 times Pennsylvania's excise tax rate on beer and covers a range of beverages, from soda and energy drinks to some teas and fruit juices.

The tax is levied on distributors, but some grocers have passed it on to drinks. This means a 12-pack of store-brand root beer costing $2.99, rings up as $5.15 because of the added $2.16 in tax, according to a previous study from the group.

The organization also found that a 12-pack of Propel energy drink in one Philadelphia store costs $9.03 with the added $3.04 tax, while a 12-pack of Icehouse beer goes for just $7.99 after the beer tax is applied. And that estimate is conservative, as the Propel was discounted when researchers did a cost comparison.

Other cities have fought for a similar tax, but they typically frame the provision within health policy, often as part of the fight against obesity. Philadelphia bucked the trend, passing the tax as a revenue-raising measure.

City officials intended the money to go toward a number of programs, including pre-kindergarten programs. But just less than half of the nearly $39.5 million collected since the tax went into effect on Jan. 1 has gone to education funding, according to the study.

Overall, the city may have overestimated the tax revenues, as soda tax collections have reportedly settled below the original projections of $92 million per year, or $7.7 million per month. The study's authors suggest the city missed its mark because of higher prices, fewer purchases and tax avoidance.

Researchers found Philadelphia's hard-won tax has met with legal battles and has made for uneasy consumers and retailers, issues that may not be easily remedied.

"Despite constituent support for the programs funded by the tax, the actual revenue for programs remains unstable due to poor collection performance, with potential that those revenues will continue to fall," according to the study. "The legal battles and consumer angst the tax has attracted make the tax unattractive as well. "

Copyright 2017 U.S. News & World Report

The 10 Most Overlooked Tax Deductions

Don't overpay taxes by overlooking these tax deductions. See the 10 most common deductions taxpayers miss on their tax returns so you can keep more money in your pocket.

Read More

Brought to you by TurboTax.com

How to Find a Good CPA for Your Taxes

Finding a good CPA for your taxes is simple with these seven tips: 1. Ask about their specialization; 2. Verify their identification number, 3. Look up their license, 4. Consider their experience, 5. Confirm their willingness to sign, 6. Ask for advice, and 7. Determine their fees.

Read More

Brought to you by TurboTax.com

Reporting Self-Employment Business Income and Deductions

Self-employed taxpayers report their business income and expenses on Schedule C. TurboTax can help make the job easier.

Read More

Brought to you by TurboTax.com

2018 Tax Reform Impact: What You Should Know

Congress has passed the largest piece of tax reform legislation in more than three decades. The bill went into place on January 1, 2018, which means that it will affect the taxes of most taxpayers for the 2018 tax year.

Read More

Brought to you by TurboTax.com
Read Full Story
Your resource on tax filing
Tax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.