Tuesday, September 09, 2008

decimals are destiny

When I started typing this, I thought the issue of the two competing referenda over the county's drink tax was over with after a county solicitor voided both of them from appearing on the fall ballot. It looks like one side at least is appealing that decision so it may not be a dead issue just yet. I have no comment on the merits of the tax or its potential repeal, but there was something really odd about the referendum proposed by the Friends Against Counterproductive Taxation, the group mobilizing support to repeal the tax. Here is a part of what they proposed being on the ballot:

".... The tax shall be levied at a rate established by County Council not in excess of one half of one percent (0.5%) of the sale price of each beverage......"... yadda yadda

I never saw anyone comment on the wording of that. The referenda was not proposing cutting the drink tax in half. That would have meant going from 10% to 5%. It proposed going from 10% to 0.5%. That's zero point five percent. In other words, cutting the tax rate to 1/20th of what it currently is set at or an incidence of 1/200th the sales price. Why wouldn't you just propose eliminating the tax altogether. I bet at 0.5% the cost of collecting and administering the tax may not even equal the revenues it brings in. It makes no sense on its surface.

So why do it? The only reason that makes sense to me to propose a tax rate a sliver above zero is that it might have confused some who would take the Solomonic position that the tax ought to be reduced, but not eliminated; that something in the middle would work out all around. But cutting a tax to 1/20th of the current rate is not near any definition of the middle and is tantamount to eliminating it altogether. On a $4 drink, the tax would be 2 pennies. I know pennies add up, but that really might have come in below the administrative costs of a new tax. I have no idea is there was any justification for the rate of 10%, but it's hard to figure what rationale there could be for 0.5% vice 0.1% or 0.9% or something else.

I really have no comment on whether the tax ought to be there or not.. maybe it should be eliminated. I'm not a big fan of the fictitious debate that has been set up between a drink tax and transit, but any referendum ought to be clear.


Anonymous Anonymous said...

I think they believed that state law would not permit eliminating a tax by referendum but would permit establishing and upper limit to the tax.

Tuesday, September 09, 2008 8:38:00 AM  
Anonymous Anonymous said...

Wholeheartedly agree. The first time or two I read debate around it it seemed people generally thought it was 5% not .5%, and I thought the same. At first I thought it was just a typo, but when I realized it was .5% I became pretty skeptical.

Tuesday, September 09, 2008 9:17:00 AM  
Anonymous Anonymous said...

I don't know why the FACT group would be for a .5% tax. It would still cost everyone (bars, restaurants, government) the same amount of money to process the tax with no real benefit to the public (more funds for transit).

I'm pretty neutral on the tax myself. It could be worse, other areas have a 10% tax on alcohol and food (DC for example). I would be curious to know if the bars and restaurants are really losing business. It doesn't seem like it to me. They would probably do better to take the money from their legal fight and reinvest it in their businesses.

Tuesday, September 09, 2008 2:38:00 PM  
Anonymous MH said...

If they do manage to get the initiative on the ballot, I'll probably vote against the tax. PA alcohol laws as a whole are so deeply annoying that if I get a shot at one, I'll take it.

Tuesday, September 09, 2008 10:33:00 PM  
Blogger C. Briem said...

that legal explanation makes sense to me.. although it implies they knew from the get go that they were on iffy legal grounds. Why they wouldn't argue for 0.1% I dunno.

Wednesday, September 10, 2008 3:55:00 PM  

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