It’s been three months since the city of Philadelphia became the largest city in America to enact a soda tax, and — as was expected — it’s now facing a legal challenge.
The American Beverage Association, several beverage companies and associations as well as individuals and local businesses (like City View Pizza and John’s Roast Pork), are suing the city of Philadelphia in county court, claiming the sugar-sweetened beverage tax pushed by Mayor Jim Kenney violates state constitution.
In June, City Council passed — and Kenney signed — a bill placing a 1.5-cent-per-ounce tax on sugar-sweetened beverages and artificially-sweetened beverages like diet soda. While the bill became law after it was signed, the tax wouldn’t have been imposed until January 2017.
The tax, which could pull in some $90 million a year, was a main tenet of Kenney’s first-year budget. He proposed the levy in order to fund a universal pre-kindergarten program, a cohort of community schools as well as improvements to the city’s parks and recreation system. In addition to those programs, the tax will also fund a number of initiatives pushed by Council members, as well as be used to pad the city’s dwindling rainy day fund.
The lawsuit filed today claims the tax circumvent’s the state’s ultimate authority when it comes to taxation. Here’s how the lawsuit explained that:
By imposing the Philadelphia Soft Drink Tax on the same beverages that are subject to the Pennsylvania Soft Drink Tax, the City is seizing the taxing authority expressly reserved to the Commonwealth in contravention of the Sterling Act’s prohibition on local taxation of a “privilege, transaction, subject or occupation, or on personal property, which is now or may hereafter become subject to a State tax or license fee.”
In addition, the plaintiffs wrote, the tax “will meaningfully diminish the everyday purchasing power of Philadelphia residents – particularly those on a limited or fixed income – and will put the City’s small businesses that sell soft drinks at a material competitive disadvantage relative to comparable businesses just outside the City’s borders.” The lawsuit is asking for a judge to place an injunction on the law.
Lawyers for the plaintiffs also argued that the tax is targeting beverages covered under the Supplemental Nutrition Assistance Program — a.k.a. SNAP, a.k.a. “food stamps” — which are typically exempt from sales tax under federal law.
The plaintiffs listed first in the challenge are Lora Jean Williams and Gregory Smith — two residents of Philadelphia both described simply as “a consumer of soft drinks.” Other plaintiffs include City View Pizza, John’s Roast Pork, Metro Beverage of Philadelphia, Day’s Beverages, the American Beverage Association, the Pennsylvania Beverage Association, the Philadelphia Beverage Association and the Pennsylvania Food Merchants Association.
While the suit was filed in Philadelphia Common Pleas Court, it could be taken up by the state Supreme Court.
The city was prepared for this legal challenge. In March, City Solicitor Sozi Tulante told Billy Penn the state has no state laws conflicting with the soda tax proposal.
“There has never been a controversial law,” Richard Feder, chief deputy city solicitor, said at the time, “where somebody doesn’t say, ‘That’s illegal we’re going to sue.’”
The American Beverage Association, which has lobbied hard against proposed soda taxes, dumped hundreds of thousands of dollars into fighting Philly’s tax and is now among the plaintiffs in the suit filed today.
“My family has worked hard to create an honest business that provides groceries in an under-served neighborhood,” Dany Vinas, who owns a C-Town supermarket in North Philadelphia, said in a news release sent by opponents of the tax. “I’ll have to raise my prices. My customers will either stop shopping at my store or have to pay more for many popular products. That’s why it’s so important that we do whatever we can to keep this tax from going into effect.”
Teamsters Local 830 Secretary-Treasurer Danny Grace issued a statement on behalf of the Teamsters, who opposed the tax when it was under consideration by city leaders.
“The Teamsters strongly support the legal action taken to defend the workers who depend on the beverage industry to support their families, local businesses who will lose customers as they’re forced to dramatically increase the price of their products and the majority of Philadelphians who have clearly explained they do not want to see their grocery bills rise,” Grace said in the prepared statement.