Two weeks ago, we pointed out that when Philadelphia became the first US city to pass a soda tax last summer, city officials were eagerly looking forward to the surplus-tax funded windfall to plug gaping budget deficits (and, since this is Philadelphia, the occasional embezzlement scheme). Then, one month ago, after the tax went into effect on January 1st we showed the tax applied in practice: a receipt for a 10 pack of flavored water carried a 51% beverage tax. And since PA has a sales tax of 6% and Philly already charges another 2%, the total sales tax was 8%. In other words, a purchase which until last year came to $6.47 had overnight become $9.75.
What happened next? Precisely what most expected would happen: full blown sticker shock, and a collapse in purchases. Just two months into the city’s sweetened-beverage tax, supermarkets and distributors are reporting a 30% to 50% drop in beverage sales and – adding insult to injury – had started planning for layoffs.
Fast forward just a few days later, when these warnings are becoming reality. According to the Philadelphia Inquirer, with sales slumping as much as 40% because of the new Philadelphia sweetened beverage tax, Pepsi said last week that it will lay off 80 to 100 workers at three distribution plants that serve the city. And since Pepsi employs 423 people in the city, it means that as much as 20% of its employees will be out of job due to a disastrous ordnance that was meant to provide additional municipal funding and instead will now lead to an increase in unemployment, coupled with a general decline in consumption, not to mention tax revenues for the city of Philadelphia.
The bottling giant sent out notices last Wednesday and said the layoffs would be spread over the next few months. “The layoffs come in response to the beverage tax, which has cut sales by 40 percent in the city, PepsiCo Inc.” spokesman Dave DeCecco said. “Unfortunately, after careful consideration of the economic realities created by the recently enacted beverage tax, we have been forced to give notice that we intend to eliminate 80 to 100 positions, including frontline and supervisory roles,” DeCecco said.
