Soda tax likely headed to court

6/21/2016 – By a vote of 13-4, Philadelphia City Council voted June 16 to approve a measure that would make Philadelphia the first major American city to impose a tax on soda.

The 1.5 cents-per-ounce tax covers both regular and diet sodas and as well drinks with added sugar, such as sports drinks, iced tea and lemonade.

The tax will be levied on distributors, who previously said all of the increases would be passed onto consumers.  For example, a 12-ounce can of soda would be increased by 18 cents.  A 2-liter bottle of soda would be an additional $1.  The cost of a 12-pack of soda would increase $2.16.

The tax is expected to take effect Jan. 1, 2017.

Freshman City Councilman Al Taubenberger, who led the Greater Northeast Philadelphia Chamber of Commerce (GNPCC) for nearly a quarter-century, joined Republican colleagues David Oh and Brian J. O’Neill in voting against the legislation.

City Councilwoman Maria D. Quinones-Sanchez was the only Democrat to vote no.

It is expected opponents will take legal action.  According to a report, the American Beverage Association has retained the powerhouse law firm Kline & Specter.

Philadelphia Mayor Jim Kenney originally sought a 3-cents-per-ounce tax on sugar-sweetened drinks to fund expanded pre-kindergarten education; community schools; improvements to parks, recreation centers, libraries, and police districts; increase in funding to the city’s woefully deficient pension fund and an energy-efficiency project for government buildings.

The GNPCC formally opposed that proposal.

The Kenney Administration believes the compromise bill will raise $386 million over five years. About $300 million will be spent on expanding pre-K, community schools, and fixing parks, recreation centers, libraries, and police districts.

Also, $4.5 million will go toward a healthy-beverages tax credit.

Additional revenue raised in the bill will be about $81 million.  It will be used for  employee benefits, primarily for disability settlements; programs within Health and Human Services, including the Philadelphia Nursing Home, youth homelessness, and feeding the homeless; covering the costs of resentencings for about 300 juveniles who were sentenced to life without parole, a penalty ruled unconstitutional by the U.S. Supreme Court; and the Community College of Philadelphia.

About $41 million of the money raised through 2020 will be deposited into the city’s general fund balances, which dropped $80 million within the last year to $70 million.

General fund balances are the difference of what a city spends and what it collects.  Rating agencies closely follow these numbers, which some believe is too low in Philadelphia.

Both sides in the debate over the tax waged expensive media campaigns, especially opponents led by the soda industry, saying the cost would fall disproportionately on lower income residents and that it would hurt small grocery businesses.

Teamsters Local 830 Secretary-Treasurer Daniel H. Grace, who spent a majority of his time the last three months battling the tax proposal, told WURD 900 AM radio he would meet with his coalition partners to discuss a path forward.  He would not rule out legal action.

Mr. Grace contends the tax, which he described as a “classic bait and switch,” will lead to a decrease in soft beverage consumption in the city, which will hurt his union members who deliver these products to local stores and businesses.

Mr. Grace thanked the four Council members who voted against the tax, but said he was personally disappointed in Mayor Kenney, whom Local 830 supported for election.

Former Pennsylvania Supreme Court Chief Justice Ronald D. Castille said the tax is a thinly disguised sales tax, therefore it is unconstitutional, since only the state can levy such a tax.  City Solicitor Sozi Pedro Tulante disagrees, since the tax is levied on distributors and not consumers.

It was an extraordinary day in Council—as sessions before summer break usually are—due to the sheer volume of bills on the docket.  Council chambers on the fourth floor of City Hall was packed with spectators.

The June 16 session even included a performance by a mariachi band, who sang the Mexican standard “Cielito Lindo,” during a proclamation for Carlos Giralt-Cabrales, the Mexican consul in Philadelphia who is leaving for a post in China.