Philadelphia’s 1.5 cents-per-ounce soda tax has survived a major beverage industry challenge in Pennsylvania state court, with a 5-2 decision Wednesday upholding a lower court’s ruling that the tax is legal.
The American Beverage Association, and a coalition of city residents and businesses, filed a lawsuit last year, then appealed when the Common Pleas Court found in favor of the city in December 2016. The group’s lawyer, Shanin Specter, said they would appeal to the state’s Supreme Court.
Still, the decision is a sigh of relief for Mayor Jim Kenney and city officials and advocates of beverage taxes around the country.
“Two courts have now considered the arguments of the beverage industry and both are certain that the Philadelphia Beverage Tax stands on solid legal grounds,” Kenney said in a statement.
“Our entire city desperately needs us to be able to move forward with the programs funded by the tax,” he said. “The beverage industry needs to see this ruling for what it is – a clear statement Philadelphia has the right to try to provide for its own – and cease the legal and public relations battle to which it has devoted millions. The beverage industry should not ask our children to wait another minute.”
The Ax the Tax beverage coalition, a group backed by the ABA, said the ruling was a disappointment and warned there would be impacts on jobs and families.
“Philadelphia grocers are also being forced to reduce employee hours and lay off workers,” the group’s statement Wednesday said. “Some are in danger of closing, threatening the city’s efforts to increase access in food deserts. This tax has also caused prices to skyrocket on thousands of beverages, which in turn has forced hard-working families to pay drastically higher prices.”
The city calls the claims of jobs loss a scare tactic and says many jobs also will be created in expansion of the pre-kindergarten and other programs.
Meanwhile, advocacy groups, including the American Heart Association, called the ruling a victory for public health. Sugary drinks are a leading cause of obesity in America, which increases the risk for heart disease, stroke and other major health problems.
The AHA’s CEO, Nancy Brown, praised the court’s decision in a statement, saying there’s a “seismic shift” in consumers demanding healthier beverages and calling on the ABA to stop the lawsuits.
The “ABA should follow the lead of those who focus their time, energy and resources to satisfying the new American thirst instead of making their tired arguments and threats of job cuts,” she said.
She wrote a column Monday pushing for more soda taxes and said the AHA is committed to working with cities through an initiative “ to advance the idea that when mayors and local leaders help their citizens live healthier and safer lives, cities become more prosperous, and which also has a particular focus on reducing sugary drink consumption.”
Nutritionist Penny Kris-Etherton said supporters of the tax look toward the high health costs wrought by sugar-loaded drinks .
“Americans consume about 13 percent of their calories from added sugars, about 270 calories, and about half of that comes from beverages,” said Kris-Etherton, Ph.D., R.D., a nutrition professor at Penn State University. “About half of all Americans consume about one sugar-sweetened beverage every day.”
The Philadelphia tax affects soda (regular and diet); non-100 percent-fruit drinks; sports drinks; sweetened water; energy drinks; pre-sweetened coffee or tea; and non-alcoholic beverages intended to be mixed into an alcoholic drink.
Drinks that would be excluded, include: 100 percent fruit juice; drinks with more than 50 percent milk; medical foods; and baby formula.
Philadelphia collected about $25.6 million in revenue in the first four months of 2017. The city is using the proceeds to add thousands of seats to its pre-kindergarten program, as well as investing in parks, recreation centers and libraries.
In the past few days, the city said it would revise the $46.2 million it hoped to collect in this fiscal year. But the mayor’s spokesman, Mike Dunn, said the city is still banking on its $92 million projection for 2018.
“As independent economists have confirmed, fluctuations such as that seen in the first four months of the beverage tax are, in fact, the normal course for any new tax,” Dunn said. “We have seen three solid months of collections compared to one ‘off’ month, and we remain confident that we’ll make our projections in the long term.”
So far, nine areas around the country have decided to begin taxing sugary beverages.
The latest, in a decision last week, is Seattle. But the tax doesn’t look the same in every city. In Berkeley, the first in the country to pass a soda tax in 2014, collections go into the city’s general fund. Seattle, when its tax begins in 2018, will use the money for education and hunger programs.
The Navajo Nation, which covers the corners of Arizona, New Mexico and Utah, began collecting a 2 percent “junk food” tax in 2015 that includes sugary drinks. Voters in Boulder, Colorado, and the California cities of San Francisco, Oakland and Albany passed similar initiatives in November. A couple of days after that, the board of commissioners in Cook County, home of Chicago, became the largest area of the country to pass a tax.
In May, however, voters in a special election held in Santa Fe, New Mexico, rejected, 58 percent to 42 percent, a proposed 2-cents-per-ounce drink tax.
Still, legislators and soda tax supporters in Connecticut, West Virginia and other jurisdictions have been working on plans.
Kris-Etherton thinks the Pennsylvania decision will only spur on more activity around the country.
“I think that many people would like to see a decreased consumption of sugar-sweetened beverages, mainly for health reasons,” she said. “One way to decrease their consumption is by taxing them.”