Updated, 1:55 p.m.
Philadelphia Mayor Jim Kenney has won his first court fight against Big Soda.
Philadelphia Court of Commons Pleas Judge Gary S. Glazer dismissed a lawsuit the American Beverage Association and local retailers and distributors filed against the City of Philadelphia Monday. The soda tax levies a 1.5 cent per ounce tax on distributors of sodas, diet sodas, juices and other sugar-sweetened beverages and is being used to fund pre-K programs, the renovation of recreation centers and to fill in holes in the city’s budget.
As of last week, the administration had already spent more than $200,000 on pre-K programs, and had budgeted $12 million for the spring semester.
“Today is much more than a simple vindication of the legal principles on which the tax is based,” Kenney said in a statement. “It is victory for Philadelphians, who have waited far too long for investment in their education system and in their neighborhoods.”
Shanin Specter, lawyer for the plaintiffs, said he planned to appeal Glazer’s decision.
The ABA and others argued the tax was unconstitutional mostly for two reasons. First that it violated the state’s uniformity clause by favoring distributors that sell high-priced lower-volume beverages (a $5 Starbucks drink) will owe less than those who sell low-priced higher-volume beverages (a two-liter bottle of soda). Glazer compared the soda tax to taxes on alcohol and fuel, which can also lead to an unequal tax burden depending on how much they are sold for.
A second argument stated Pennsylvania already taxed soft drinks 6 percent as part of a different tax and that this tax would illegally duplicate the state tax. Glazer wrote Philly’s soda tax was not duplicative of the Pennsylvania Beverage Tax because Philly’s tax is levied on the distributor and that it was irrelevant that the tax would likely get passed on to consumers, therefore taxing the same subjects — those who purchase beverages — as the state tax.
An argument that SNAP benefits would be used to pay a sales tax was also thrown out by Glazer for the same reason: because the tax is collected on distributors.
Kenney asked for opponents of the soda tax to stop with any future challenges.
“The industry has chosen not to challenge beverage taxes in other municipalities and there is no reason to continue pursuing it here,” he said. “Regardless of their decision, the City will not stop pursuing what those kids need most – quality pre-K, Community Schools, and better parks, libraries and rec centers.”
As of last week, the administration had already spent about $200,000 on pre-K programs, and had budgeted $12 million for the spring semester. The tax is expected to raise about $90 million annually the next five years. Through July 2020, about $41 million will be used to strengthen the city’s fund balance and about $15 million goes to various uses, such as programs for youth homelessness and disability settlements. Everything else — and after July 2020 the entirety of the soda tax revenue — is slated for use for pre-K, community schools and parks and recreation sites.
The city has started a database on its website listing distributors and giving information about tax collection. The first collection date is February 20.
