sales tax soda
If you’ve watched any of the Democratic Presidential Debates this primary season (or tuned into any news source at all), you’ve undoubtedly noticed that Hillary Clinton and Bernie Sanders disagree on many key issues. We now learn they can’t even find common ground on soda taxes.

As President Obama himself has noted, sales tax is imposed at the state level; federal lawmakers have nothing to do with them. Why, then, are soda taxes surfacing in the presidential campaigns of Secretary Clinton and Senator Sanders?

Clinton and Sanders spar over soda

The issue has made headlines because of the Pennsylvania primary taking place today, April 26, and the fact that Philadelphia Mayor Jim Kenney is backing a tax on soda and other sugar-sweetened beverages. If approved, the tax will fund universal preschool, community schools that combine education and social services, and the municipal pension program. If rejected, Philadelphia will remain short on essential revenue until another solution can be found.

Secretary Clinton has endorsed the mayor’s soda tax: “I’m very supportive of the mayor’s proposal to tax soda to get universal preschool for kids. I mean, we need universal preschool. And if that’s a way to do it, that’s how we should do it.”

Senator Sanders also backs universal preschool, but he opposes taxing soda to fund such programs: “Making sure that every family has high-quality, affordable preschool and child care is a vision that I strongly share. On the other hand, I do not support paying for this proposal through a regressive tax on soda that will significantly increase taxes on low-income and middle-class Americans. At a time of massive income and wealth inequality, it should be the people on top who see an increase in their taxes, not low-income and working people.”

Mayor Kenney is of another opinion: “I’m disappointed Sen. Sanders would ignore the interests of thousands of low-income — predominantly minority children — and side with greedy beverage corporations who have spent million in advertising for decades to target low income minority communities.”

Is sales tax regressive?

The senator from Vermont is not the first person to call sales taxes regressive. Lower-income people generally do pay a higher portion of their income on sales taxes, no matter what the product. The regressive nature of sales tax is often underscored by those who oppose extra taxes on particular products, such as tobacco and soda, which are often more likely to be consumed by lower-income people.

Symptom of a nanny state?

Soda and similar product-specific taxes have also been seen as sign of a nanny state, one that tries to enforce certain behaviors and discourage others. When soda taxes were proposed in San Francisco and Berkeley in 2013, the American Beverage Industry launched a counter campaign that struck a nerve with many voters: “We believe consumers should decide what goes into their shopping carts, not governments.”

Consumers are of course free to buy what they want; they just have to pay more taxes on some products than others. But the tax in San Francisco, which was ultimately defeated, was in fact intended to reduce consumption of sugar-laden beverages. And British Prime Minister George Osborne, in announcing a new tax on sugary beverages that will take effect in 2018, was clear that his intention is to affect consumer choice: “We understand that tax affects behavior. So let’s tax the things we want to reduce, not the things we want to encourage.”

The bottom line

Yet the tax under consideration in Philadelphia is not being promoted as a solution to poor health. Pennsylvania in general and Philadelphia in particular are in dire need of tax revenue to fund essential services like education. Governor Tom Wolf (D) has proposed increasing the state sales tax rate and broadening tax to many currently exempt services. Mayor Kenney has proposed a specific tax on soda — and thanks to the Democratic presidential candidates, the whole country now knows about it.

Sales tax may or may not be regressive and nannyish. It is challenging for companies large and small. Sales tax software facilitates sales and use compliance in all states. Learn more

photo credit: Bernie Sanders via photopin (license)