Mayor Kenney's Budget Makers Take Spoonful Out Of Proposed Tax On Sugary Beverages
By Steve Tawa
PHILADELPHIA (CBS) -- The people who crunch the numbers for Mayor Kenney on his proposal for a 3-pennies per ounce sugary drink tax met with reporters in the administration's cabinet room to spell out the methodology they used.
They also will amend the proposed bill, after an "oops" moment in their figuring.
City Finance Director Rob Dubow expects they will revise downward the tax on fountain drinks, to bring it in line with that of bottled beverages.
"I think really it's just something that we didn't pick up, as we worked off the legislation that we had, and now we'll work to correct it."
The Kenney administration admits to using figures culled from former Mayor Nutter, whose team used a different ratio that set a higher levy, 4.5-cents per ounce on fountain soda - that's syrup mixed with water, used at convenience stores, restaurants and sports stadiums - versus 3-cents on bottled sugary drinks.
Dubow anticipates both would be taxed at 3-cents per ounce.
All told, Deputy Revenue Commissioner Marisa Waxman projects sugary drink consumption to decline initially 55 percent, due to the tax, then drop by 1 percent annually to reflect an ongoing pattern.
After getting a handle on where folks buy their sugary drinks - 48 percent of which come from supermarkets - Waxman says they analyzed what is called "price elasticity," to calculate changes in purchasing behavior, based on price. In economics, it shows the relationship between price and demand, and Waxman says they calculate it to be negative one (-1).
"A negative one price elasticity is the easiest to calculate. Basically, whatever the increased percentage in price is that is then the decreased percentage in consumption."
That means, say, if the price goes up by 10 percent, they would anticipate consumption would drop 10 percent."
Local analysts looked at the experiences of places like Berkeley, California and Mexico, which have instituted sugary drink taxes, but below the Philadelphia level. Ours would be the highest in the nation, if passed as is.
The so-called soda tax is central to Mayor Kenney's plan to generate up to $400-million for key programs, including universal pre-K.
