The socialist father of our modern economic system, John Maynard Keynes, may not have been right about everything, but he was right about one thing. Once upon a time, the elderly economist looked at the world and figured out something rather intriguing, that “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”
Certainly, in the pursuit of adding a “win” to their scoreboard, officials in Philadelphia decided to raise money for schools and lower obesity by taxing something everyone loved- soda.
The infamous Soda Tax was drafted to fight obesity in the city while at the same time using revenue from the tax to go towards additional school funding. While the mentality of the tax might be sound among fans of Keynes, taxing things at a rate which disincentivizes what consumers want to purchase is hardly moral. The economics aspect aside, the Soda Tax was created with an ulterior motive which came out of the shadows only recently.
According to a Jan. 31st piece at the Washington Times, “a federal indictment unsealed Wednesday, corrupt Democratic city officials and electricians’ union leaders pushed through the soda tax in 2016 in a revenge feud against the Teamsters union, instead of a motivation to affect public health.” So there you have it, our elected officials who are often deemed to be more righteous than their private sector counterparts, used their offices and legislative authority to wage a war on the teamsters in hopes that the Soda Tax would kill trucking jobs.
Now most would hope in this situation, the only thing to die would be the honorable reputation of those who will be trading city hall for a jail cell, but sadly there were some major casualties in the forms of jobs for regular people.
An article at the Mises Institute collected accounts of all the damages done thus far by the Soda Tax, one of them is the sad demise of a major RiteAid retailer in Philadelphia that had to shut down as a result of supermarkets losing upwards of fifty percent of their gross sales. A research paper coming out of Stanford University showed that the Soda Tax didn’t even manage to raise the funds for schools the Philly city council had promised; instead of the thirty to forty percent increase in taxes collected, the Soda Tax caused a giant drop “by forty-two percent in response to the tax.”
As far as fighting obesity and diabetes, not even the so-called experts know how to track the data to see whether or not the Soda Tax did anything to help the health of the city in the long run.
So what can be gleaned from this tragedy of a policy? The Soda Tax targetted something people loved, and when they started to feel the costs hit home they stopped buying. When consumers stopped buying, stores closed down, and instead of an increase in taxes, tax revenue dropped. In terms of a health impact, experts didn’t know then nor know how to figure out if the city became healthier as a result of the decrease in sugar consumption from soda.
However, at the end of the day, the simple reality summed up is this- some politicians in the pockets of labor union leaders wanted to use the force of government to help them in a feud, and as a result regular people bought less of the products they wanted, the schools didn’t get the money they were promised, and hardworking people lost their jobs as a result.
Like all other government plots to manipulate the market, from Obamacare to tax-incentives for green vehicles, there will still be those loyal, pro-interventionists that say despite the controversies attached, the intention of the laws are at their heart pure even when the added results don’t go along the lines of the promises made. In their case, they need less Keynes and more F.A. Hayek, who in his book The Fatal Conceit stated, “The curious task of economics is to demonstrate to men how little they really know about what they imagine the can design.”