Philly’s Soda Tax Isn’t Racist, and It Isn’t Regressive, Either*
(*:assuming it actually reduces sugar consumption)
Philadelphia is crisscrossed by streets named for lovely indigenous trees. Alas, none of them grow money. The city’s population is also surprisingly obese, for a town with a walkable downtown and fairly extensive transit system (54th out of major U.S. cities, waddling in just ahead of Austin and Providence, the city of donuts). These two facts–high health costs, absence of deciduous dollars–jointly motivate its recent tax on some sugary beverages (which I’ll just call the “soda tax,” because it takes fewer keystrokes).
Some recent commentary labels the soda tax regressive, and one generally thoughtful tax prof posted an op-ed on the TaxProf blog suggesting that the tax’s disparate impact on the African-american population of Philly makes it essentially racist, as well. I don’t want to defend all aspects of Philly’s policy. It has too many exceptions, and probably isn’t as attractive a policy as many alternatives (for instance, I might’ve gone big on portion-size limits). But I don’t think either of these critiques is persuasive.
To buy any of my arguments, you first have to accept the premise that a soda tax will actually improve the health of Philadelphians. That’s certainly not a given. It might turn out that people substitute to other, maybe even to worse, choices. If so, then yeah, it’s a just another regressive sales tax, as Rachelle Perkins showed, and maybe one with a disparate impact on minority communities (not just AA communities; Hispanics tend to consume as much or more soda as non-latino blacks). This is why I would have preferred to see much broader coverage, if the city were going to stick with a tax at all.
For the sake of argument, let’s stipulate that the tax actually will reduce obesity, with follow-on benefits in increased labor supply and lower health costs. If that’s right, it’s not any more regressive than a trip to the doctor. In effect, the soda-drinking community is paying (or, if they kick their soda habit entirely, not paying) for their own health benefits. If those benefits are greater than their costs for most individuals, the fact that the tax affects poorer communities more actually makes the policy progressive, not regressive, a point Jon Gruber & Botond Koszegi have made about tobacco taxes.
That is not to say that there aren’t other, perhaps better, policies that would be even more progressive. I’ve argued in a couple of places that it would probably be even better to make health improvements of this kind available to poorer communities for free, or at a big discount. For technical tax economics reasons, these kinds of transfers are potentially a very efficient tool for redistribution (in essence, because it’s like being able to tax people based on their ability to earn income, rather than their actual incomes). They might also be a good way to advance racial justice.
Whether in fact the benefits of redistribution are worth the revenue cost isn’t obvious. It depends on things like whether, when you give people more money, they do even more of the thing you’re trying to prevent. I’d be very happy to engage on those kinds of questions with folks who take the time to read my work. In my view, though, to just complain that the statute is unfair is to miss almost all the important questions.