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Tax the Rich, Not Unhealthy Products

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Union members protest in opposition to a proposed tax on soda and other sugary beverages in view of City Hall on Tuesday, June 14, 2011, in Philadelphia. Mayor Michael Nutter is pushing a 2-cents-per-ounce tax on soda and other sugary beverages to help prevent cuts in the city's cash-strapped school system. A similar plan was scrapped last year. (AP Photo/Matt Rourke)

Progressives should not be supporting regressive sin taxes because they want to punish people for their behaviors. The mayor of Philadelphia has proposed a soda tax. This is not a good thing.

When it comes to politics, we live in very, very strange times. If you think this is the start of another piece about Donald Trump, well…ha, for once you’re actually wrong! It’s about the Philadelphia soda tax brouhaha. In fact, I’m pretty sure that Trump is, by now, just about the only major figure in American life who hasn’t weighed in on Mayor Kenney’s scheme to fund pre-kindergarten, community schools and parks and rec programs by imposing a three-cents-an-ounce tax on sugary drinks, mainly soda pop. (Prediction: Trump would stun the world by saying “I have no problem with the soda tax,” Rush Limbaugh would have a fit, and 45 minutes later there would be a statement: “Mr. Trump has always opposed the Philadelphia grocery tax.”)

Sin taxes to fund basic civic functions are particularly problematic, as you are hoping to dissuade behavior you actually need to continue if you want to fund those schools. Unfortunately, Pennsylvania has what seems to be a disastrous clause in the state constitution making progressive taxation hard to enact.

This is wrong, but it’s nothing new, especially not in Pennsylvania. Regrettably, unfair taxation is hard-wired into the state constitution with its so-called “uniformity clause,” which the courts have held means that the commonwealth can’t impose a graduated income tax. That’s played out so Pennsylvania — and Philadelphia in particular — is heavily reliant on the sales tax, which hit poor people the hardest because they pay the largest share of their income on necessary consumer goods. The non-partisan Taxation and Economic Policy says Pennsylvania is the 6th most regressive state for taxes in the U.S., which is a polite term for lower-income people getting screwed. Folks in the bottom fifth pay 12 percent of their income in state and local taxes, but the top 1 Percent (where have I heard this before?) pay just 4.2 percent.

I was thinking of the unfairness the other day when I read that Philadelphia-based Comcast’s new chief financial officer, or CFO — 50-year-old Michael Cavanagh — was compensated last year at annual rate of more than $40 million, the highest paid CFO of any public company in America. I’m sure he’s a good dude who’s very good at making sure the numbers on the left side of the page add up to the column on the right. But is it fair that his state income tax, his Philadelphia wage tax or — maybe in a few months — his can of RC Cola is taxed at the same rate as the janitor who cleans his office? Or that he works in a gleaming skyscraper that got $42.5 million in state grants and other aid and millions more in city tax abatements, all for the nation’s most profitable cable giant.

I know it’s apples and oranges, but it’s hard not to notice that the tax write-offs and grants for just one of the eventually two palatial Comcast digs in Center City is on a par with what City Hall pegs as the annual cost — $60 million — of getting 5,000 more 3- and 4-year-old into quality pre-K programs. Or that Cavanagh’s salary (unless I’m botching the math) could pay the city’s cost of schooling about 3,400 of those kids. Is this really our moral priority system these days? Don’t even bother to answer that.

Progressives should not be supporting taxes where the janitor pays precisely as much as the CEO. That’s why sales taxes are highly sub-optimal in any case. Sin taxes are often more. People often smoke and drink alcohol and drink soda for reasons that have to do with poverty, depression, a lack of hope in life, bad habits picked up in high school or before, etc. Unless we are going to start issuing identity cards you have to run when you pay that tax rich people 50% for their sodas while taxing poor people 2% or something like that, these sorts of taxes are not the way to fund education. That’s especially true given corporate tax write-offs.

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