Here’s Why Soda Taxes Won’t Hurt Beverage Stocks

redsodatabs-1536461-639x492From Uncommon Wisdom Daily: Philadelphia is the first major city in the country to pass a tax on soda. The levy also applies to fruit drinks, sweetened iced tea and juices with less than 50% real fruit. At 1.5 cents-per-ounce, the move adds about $1 to the price of a two-liter soda and more than $2 to a 12-pack. In comparison, the state excise tax on a 12-pack of beer is only 9 cents.

The mayor’s goal is to increase educational funding in the City of Brotherly Love. In reality, it gives city officials more money to throw at the status quo.

And after learning that full-calorie soda consumption has dropped by more than 25% since the late ‘90s and declined for the past 11 years, lawmakers tacked on an addendum to include diet sodas.

Since 2009, there have been about 40 attempts to enact a soda tax in cities across the United States. And in November, voters in Boulder, Colo., San Francisco and Oakland, Calif., will decide if their cities get a tax on sodas. Efforts are also under way for a similar tax in Illinois and Alabama.

Former New York Mayor Michael Bloomberg, who had pushed to ban giant-sized sodas in his city, said,

“The question is not whether any city follows suit, but rather how many — and how quickly?”

With the prospect of a soda tax spreading throughout the country, think of what it could mean for us taxpayers …

 

Soft drinks are considered food items by the USDA. Therefore, they can be bought with SNAP (food stamp) benefits. The more that SNAP users have to spend on sodas, the less they’ll have for fruits and vegetables. Consequently, more of our tax dollars will be needed help the poor eat better.

And what about the sugarcane industry and its workers?

A wide-reaching sin-tax could eventually cut demand for sugar. Farms get sold to housing developers, and workers lose their jobs. Unemployment benefits increase. Of course you know who’ll pick up that bill.

Here in Florida, the sugarcane industry directly employs thousands. And thousands more are employed in related sectors. Tax money from sugar farms pays for schools and roads. If the tax money goes away, property values go down … and people leave.

More unemployment, more welfare payments = higher taxes for the rest of us.

Hop across the border

Philadelphia’s residents quickly figured out how to avoid a city tax on cigarettes: Go to other cities where there is no tax to buy their smokes. Same thing is bound to happen with sodas, which would take business away from convenience stores, especially those near the border.

Ken Klein, co-owner of Klein’s Supermarket in Philadelphia, which has been in business since the 1890s, said,

“Most people have cars, and they are going to get in the cars and go six miles up the hill and go to the stores there.” 

That leaves the poor, who don’t have the means to leave the city, to carry the heaviest burden.

Baltimore smashed consumers over the head with a bottle tax in 2010. One of the losers was the landmark 83-year-old Santoni’s Supermarket in Highlandtown.

Owner Robert Santoni said the tax caused an “irreversible” decline in business as customers fled for suburban stores; beverage sales slumped 28% and customer traffic 20%. Some 80 workers would lose their jobs.

He told the Baltimore Sun

“What has taken 83 years to build has been torn down by one person [the mayor] and one bad law.”

Same thing happened in Massachusetts when consumers avoided the state’s levy on alcohol by driving across the border to buy booze. Lawmakers responded by sending officers to write down its own citizens’ license plates in the parking lots of New Hampshire liquor stores.

In 2014, Berkeley, Calif., tacked a 1-cent-per-ounce tax on sodas. Several big chain retailers simply swallowed the extra cost and offered bargain prices, which put mom-and-pop stores at a huge disadvantage.

An owner of a neighborhood grocery store said,

“It only hurts the small businesses in Berkeley — that’s what I believe. If they need to help the people with the sugar, they should put less sugar in the soda and talk in the school about junk food, about diabetes.”

Will soda consumers have a relapse?

Take a look at Mexico …

Three years ago the country implemented a soda tax to fight soaring rates of obesity and diabetes. Consumption declined in 2014 and 2015. However, volumes grew 2% between January and April 2016 compared to a year earlier. This shows that old habits are hard to break once the sticker shock wears off.

Related story: A Soda a Day Can Age You Five Years

Nannyism icon Senator Bernie Sanders, who rarely sees a tax he doesn’t like, opposes the soda tax. He spoke out earlier this year, saying,

“A tax on soda and juice drinks would disproportionately increase taxes on low-income families in Philadelphia.”

Hillary Clinton disagrees with Sanders. Hoping to sway voters, she said,

“I’m very supportive of the mayor’s proposal to tax soda to get universal preschool for kids. We need universal preschool and if that’s a way to do it, that’s how we should do it.”

The non-monetary side effects …

This year officials in Boulder, Colo., deemed the ice cream cone as unhealthy and removed it from the list of appropriate foods sold at city-run refreshment stands. So kids will no longer have the pleasure of cooling off with the traditional treat while hanging out at the city pool.

An 8-year-old wrote to the local newspaper saying,

“I’ll get over it, but then it brings back a lot of memories of me getting ice cream sandwiches. Like this one time, when I was eating one very slowly, so it melted all over me. It makes me feel sad to say.”

Clearly, this is another example of the Nannyism sweeping our country that we wrote about earlier this year.

Could Cheese Whiz be next?

Ed Rendell, a former Philadelphia mayor and former Pennsylvania governor, believes tinkering with market forces is dangerous. He spoke at a local radio show,

“While it’s true that sugary drinks are a health problem, so are cheeseburgers. So are donuts. Are we going to do a tax on sugary donuts at Dunkin’ Donuts and Krispy Kreme? Are we going to tax cheeseburgers at McDonald’s?”

Lawmakers who have sought to balance budgets and fund programs with targeted tax hikes have experienced disappointment firsthand. Because soda consumption, like tobacco use, is declining nationwide, a soda tax will soon miss revenue projections — creating future budget shortfalls.

But with an ever-expanding government that needs to be fed, they’ll have to search for other activities to tax on the broader populace.

For instance, bureaucrats mining for tax dollars could decide to put the squeeze on Cheese Whiz … that yellowish-orange, gooey, processed cheese spread that’s high in sodium, full of sugar and packed with saturated fat.

Pat’s King of Steaks, known for their cheese steaks with Cheese Whiz has been part of South Philly for generations and now a favorite stop for tourists, could be at risk.

It’s been proven time and time again: Resorting to raising taxes does not solve problems.

Former British Prime Minister Margaret Thatcher made that point so well when she said,

“The problem with socialism is that sooner or later you run out of other people’s money.”

Don’t let it be your money.

The Coca-Cola Co (NYSE:KO) shares rose $0.24 (+0.55%) to $43.99 in Friday morning trading. The largest beverage maker in the world has seen its stock gain 2.39% year-to-date.

KO-2016-08-12

PepsiCo, Inc. (NYSE:PEP) shares rose $0.21 (+0.19%) to $108.69 on Friday morning. The second largest beverage maker in the U.S. has seen its stock rise by 8.83% year-to-date.

PEP-2016-08-12

This article is brought to you courtesy of Uncommon Wisdom Daily.

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