re: Liberal Economics on Full Display in Philadelphia

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The distributors sells five-gallon boxes of syrup that can be used in soda fountains, and each box costs a retailer about $60. Thanks to the city's new tax, though, retailers have to pay $57.60 in taxes for each of those boxes of syrup.

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When it was passed last year, Philadelphia became the largest city in the nation to create a specific tax for soda and sugary beverages, a policy that had previously been contained to progressive enclaves like Berkeley, California. The tax is levied at a rate of 1.5 cents per ounce, which makes it 24 times more expensive than Pennsylvania's taxes on beer.

Practically, that means that some drinks end up being nearly twice as expensive after the tax is applied, turning $2 sodas into $4 sodas.

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Not enough information. How many drinks does the 5 gallon box of syrup make? And how much did he actually raise the price of drinks? It certainly wouldn't be the first time that retailers, when faced with the necessity of raising prices to cover increased costs, built in a little extra profit.

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Just one 5-gallon box of syrup makes about 3,840 ounces of soda or 192 20-ounce cups. Depending on whether it's his own label or a national brand like Coca-Cola, Pincus charges anywhere from $60 to $90 per box.

But now, every time he sells one to a customer in Philadelphia, Pincus owes the city $57.60 in taxes.

"We're not talking about a couple of bucks on a $60 item," he said. "We're talking about $57.60 on a $60 item. It's too big not to pass on."

Pincus explains it this way: For every 5-gallon box of syrup he sells, he says he makes between $3 and $18 in gross profit — that's the price he sells it for minus the cost he pays the manufacturer. Out of that, Pincus has to pay his delivery truck drivers, buy gas for the truck and cover other costs of doing business. That means he can't afford to absorb the tax himself.

But some of his customers were not happy when they got their new bills last week.

"They started yelling at my drivers as if they have something to do with it," Pincus said. "Customers telling them, 'This isn't right. This can't be right,' as if we're making a mistake."

Others are simply passing the full cost of the tax along to their customers.

Alan Giannone runs a catering business and restaurant in Northeast Philadelphia, and, every month, he buys eight of those big syrup boxes for his soda fountain. Now, those boxes will cost him more than $400 extra every month.

Starting Saturday, the price of a glass of soda at Giannone's Village Restaurant went up 30 cents to $2.95.

"Twenty ounces costs me 30 cents extra," he said. "I'm only charging what they're charging me."

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