Beverage Tax Follies: A New Policy Briefing

Executive Summary

Emulating Philadelphia Mayor Michael Nutter, Mayor Luke Ravenstahl proposed a sweetened-beverage tax of 2 cents-per-ounce in March and, although the Philadelphia tax is dead, the Pittsburgh Beverage Tax is still very much alive.

One in a series of taxes, fines and fee-hikes proposed by city politicians as a partial solution to Pittsburgh’s pension crisis, the Pittsburgh Beverage Tax is an unresolved issue in local government.

Part of a broader legislative trend across the country, the Pittsburgh Beverage Tax is an attempt to quickly fill city coffers – the Ravenstahl Administration estimates yearly revenue at $25 million – justified by the need to combat obesity. In this way, the tax poses a question to Pittsburghers: Do you want your government to control your personal habits through punitive taxation?

The Publius Foundation’s answer to this question is no. Such a meddling approach to citizen’s lives it not only an inappropriate use of government’s power to tax, it is also bad economic policy the implementation of which threatens to harm local businesses and adversely impact the balance of the local economy during a recession.

This briefing examines the potential impact of the tax in three distinct areas:

• Paternalism: Ravenstahl and other proponents of the Beverage Tax justify it by saying that it is a necessary step in the fight against obesity. Such a paternalistic purpose – protecting Pittsburghers from themselves — is not in keeping with the traditional role of representative government.
• Efficacy: Studies show that taxes like the Pittsburgh Beverage Tax fail to meaningfully reduce obesity levels. The only impact that this tax will have is a negative one on the city’s economy.
• Economic Impact: The passage of such a tax could cost jobs and harm businesses inside the city during a tough economic time. The tax should also be understood as a measure that would distort the value of commodities in the local economy making, for instance, a case of soda cost more than a case of beer.

To download the full policy briefing as a PDF, please click here.