Earlier this year, Philadelphia’s Mayor Jim Kenney wanted to do something that no other major American city had done so far: pass a targeted soda tax. He got his wish: the new tax, which will add 1.5 cents per ounce to the cost of most sugary and diet beverages, is scheduled to go into effect in 2017.
Or maybe not.
The American Beverage Association (ABA), together with a number of other businesses, including beverage distributors and retailers, have filed a lawsuit to stop Philadelphia from collecting the tax, claiming that it’s illegal under state law. The lawsuit was filed in the Philadelphia County Court of Common Pleas and the Pennsylvania Supreme Court.
Currently, 33 states impose a sales tax on soda or sugar-sweetened drinks. At an average sales tax rate of 5.2%, consumers still pony up at the register for a Big Gulp or a Pepsi. For the tax to be effective at reducing consumption, the targeted tax needs to be relatively steep compared to the other options. Philadelphia’s 1.5 cents per ounce excise tax on soda and other sugary drinks, called the Sweetened Beverage Tax (SBT), probably won’t be enough to reduce consumption. Mayor Kenney, however, has continued to tout the revenue benefits from the bill.
Philadelphia’s 1.5 cents per ounce excise tax on soda and other sugary drinks, called the Sweetened Beverage Tax (SBT), probably won’t be enough to reduce consumption. Mayor Kenney, however, has continued to tout the revenue benefits from the bill.
No matter how much money the tax could raise for the City and its programs, the tax is illegal, according to the plaintiffs, because the state already imposes a 6% sales tax on many of the same soft drinks that would also be affected by the SBT. Additionally, the plaintiffs claim that the SBT violates a federal mandate targeting Supplemental Nutrition Assistance (SNAP) funds: the SBT could, according to the complaint, affect the state’s ability to collect and distribute SNAP funds.
The goal of the lawsuit is “voiding of the tax,” according to Shanin Specter of Kline & Specter, who represents the plaintiffs.
In response to the suit, Mayor Jim Kenney and City Solicitor Sozi Pedro Tulante released the following statement:
We are ready and prepared to vigorously defend this legislation and to protect the historic investment planned for Philadelphia’s neighborhoods and education system,” said City Solicitor Sozi Pedro Tulante. “We have always been confident that the Sweetened Beverage Tax was a proper exercise of City Council’s authority and that it will be upheld in Court. We are currently in the process of reviewing the Complaint that was filed against the City of Philadelphia by the American Beverage Association and co-plaintiffs this morning in the Court of Common Pleas. We have retained former City Solicitors Ken Trujillo from Chamberlain Hrdlicka and Mark Aronchick from Hangley Aronchick Segal Pudlin and Schiller to join the City’s litigation team.
Mayor Kenney added:
Pre-K, community schools and improved parks, rec centers and libraries will give Philadelphia’s children the fair shot they deserve. While it is repugnant that the multi-billion-dollar soda industry would try to take away these educational and community programs from the hundreds of thousands of Philadelphians who need them, we were not surprised by their lawsuit given the ten million dollars they have already spent opposing the tax. I have no doubt we’ll be successful in defeating the lawsuit.
The Philadelphians Against the Grocery Tax Coalition also issued a statement about the lawsuit. However, the coalition “fully supports the lawsuit filed earlier today that asks the courts to strike down Philadelphia’s unconstitutional and regressive tax on beverages.”
