Whenever government intervenes, it creates several unintended consequences.
Case in point, Philadelphia recent imposed a 1.5 cent-per-ounce tax on soda as a way to combat growing obesity. Not only did the tax cost hundreds of jobs in the City of Brotherly Love and not generate tax revenues as expected, it actually caused Philadelphians to turn to a cheaper alternative: beer.
According to a new study by The Tax Foundation, the city’s soda tax is 24 times Pennsylvania’s tax rate on beer. This meant that the tax rate on non-alcoholic beverages made them more expensive than beer for the most part.
This isn’t anything new. Ostensibly, the think-tank notes, there has been research published about this trend before. For instance, a prior study discovered that sports drinks were more expensive than beer in the same city. It seems like Philadelphia didn’t care because it wanted some more money.
When the tax was first proposed, municipal leaders championed the theft as a way to fund pre-kindergarten education. Not so. In fact, Philadelphia allocated just 49 percent of the soda tax revenues to local pre-K programs. Simply put: it was an excuse.
The Sovereign Man (via Zero Hedge) made a great point:
Governments refuse to believe in economics. They think they can just continue to pile the taxes on. But once the costs get too high, people change their behavior.
Sometimes that means going somewhere else to buy your soda. Sometimes that means making different choices, like beer instead of soda.
But hardly ever do governments get what they predict. The mayor even originally wanted the tax to be 3 cents per ounce. Some stores are reporting a 50% drop in soda sales, so you can imagine what would have happened at double the tax rate. Yet all the greedy politicians imagine is dollar signs.
The beer companies are really the only ones who made out on the deal.
As legendary free market economist Milton Friedman said, “Governments never learn. Only people do.”
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