Beverage industry to fight back against Philadelphia’s new soda tax

By Adi Menayang

- Last updated on GMT

Related tags Tax

Photo: iStock
Photo: iStock
Philadelphia's new soda tax violates state law, says the American Beverage Association (ABA), which is preparing to take legal action to challenge the levy.

The per-ounce levy championed by Philadelphia Mayor Jim Kenney was passed by a 13-4 approval vote last Thursday. With the new tax, 1.5 cents per ounce will be added to the cost of most sugary and diet beverages, reported​. Though the media has called it a "soda tax," Mayor Kenney's office refers to it as a "sweetened beverage tax,"​ as not only carbonated beverages are subject to it.

According to Kenney, the tax is expected to generate $91 million every year, which will go towards projects to improve the city’s public school system.

“This tax is illegal because it violates the Pennsylvania constitutional requirement of uniformity of taxation and because a local government doesn't have the power to impose a sales tax when the Pennsylvania legislature already has imposed a sales tax,” ​Shanin Specter, whose law firm Kline & Specter was retained by the ABA shortly after Thursday’s vote, told FoodNavigator-USA.

Is it what the people want?

“If the tax were a referendum in which the people had their say, it would have failed,”​ added ABA spokesperson Lauren Kane.

The association commissioned a telephone poll of 400 likely November voters, conducted from June 2-6. “[It] shows that just 38% of voters support the proposal to place a 3 cent-per-ounce tax on sugar sweetened beverages, while 58 percent oppose,” ​said a press release from David Binder Research, who conducted the poll for ABA.

The data was compared to a previous survey conducted March 7-13, and the results showed that a dramatic decline has happened in the time span—only 44% of voters opposed the tax just three months ago.

A prepared statement from the ABA called the tax regressive, and Kane explained: “Regressive means lower income families have to spend a larger portion of their income on the tax than higher income families so it hits them the hardest.

“These taxes cripple small businesses, threaten family-sustaining jobs and raise grocery bills on families struggling the most,” ​she added. This stance is shared by US presidential candidate Bernie Sanders, who wrote an op-ed​ in Philadelphia Magazine that called it “a regressive grocery tax that would disproportionately affect low-income and middle-class Americans.” 

Traveling the country

According to Quartz, a landmark measure​ passing in the fifth-largest US city “is proof that taxes on sugary drinks can win substantial support outside super-liberal enclaves.”​ The only other city to have successfully passed and implement a soda tax, Quartz reported, was Berkeley, Calif., in 2014, where a can of soda is now taxed 1 cent per ounce.

So will the tax make it out of the courtroom in Philadelphia? “In the past century there have been several local governments that have tried to impose similar unlawful taxes --such as on coal, liquor and billboards—and they've been properly struck down by the courts,”​ Specter said.

But the case may be different for beverages. As reported: “Few cities have imposed restrictions on the sales of sugary drinks, and even fewer of those cases have been challenged in court.”

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