- In a 4-2 majority opinion, the Pennsylvania Supreme Court upheld Philadelphia’s controversial 1.5-cents-per-ounce tax on soda and other sweetened beverages, according to the Philadelphia Inquirer.
- Philadelphia was one of the first major U.S. cities to pass a tax on soda and sweetened beverages in 2016. Opponents of the tax have since argued that the levy amounted to double taxation because it is passed down to consumers who already pay sales tax on the items.
- Although the city predicts to collect more than $78 million from the tax in the current fiscal year, the tax has raised less than initially projected, causing the city to lower its estimates by 15% and downsize plans for the programs it funds. Revenue is expected to decrease over time as soda consumption declines.
In a climate of strong opposition to soda taxes — Cook County, Illinois repealed its tax last fall, and last month California passed a law allowing existing soda taxes in cities like San Francisco and Berkeley to remain in place, but banned cities from passing new ones — the Pennsylvania Supreme Court showed that there is still legal support for this type of tax.
Those in the other camp though, will not easily be persuaded of the virtues of these extra fees. Opposition to the tax has been boiling since it was implemented and has not subsided since the state’s Supreme Court ruling came down this week.
Since 2009, the soda industry has spent $48.9 million on soda tax opposition campaigns throughout the country, analyst Phil Lempert noted, citing a November 2017 report by the Center for Science in the Public Interest.
Critics claim these taxes are merely a money grab disguised by a concern over sugar consumption and public health. However, studies have shown widespread support for soda taxes as long as the money goes toward programs like preschools and children's health programs, or help address obesity – much like Philadelphia proposed. Philadelphia Controller Rebecca Rhynhart reported about 74% of the funds collected have gone into Philadelphia's general fund, rather than specific programming.
Even with public support and good intentions, beverage manufacturers and retailers said that they have suffered devastating losses since Philadelphia's tax went into effect in 2017. In the city, PepsiCo saw a 40% decrease in sales, which it claimed was the result of the tax. The company said it would lay off 80 to 100 workers there. Grocery retailers in the area have seen great losses, with some reporting drops in sales of 40% to 50%.
An active soda tax, however, is not solely responsible for a reduction in sugary drink consumption; suggesting one is enough. The American Heart Association found in Vermont, that attitudes about sugary drinks shifted quite dramatically after the state legislature considered a soda tax — which ultimately failed.
As it stands, beverage manufacturers will have to learn to cope with the tax being upheld. Already, brands have responded with smaller can sizes. Pepsi stopped distributing two-liter bottles and 12-packs of soda to Philadelphia retailers three months after the city implemented its soda tax. The company still distributes one-liter and smaller size bottles and cans.
Another avenue that beverage manufacturers say they will continue to pursue is litigation. According to USA Today, The Ax the Philly Bev Tax Coalition claims the tax has cost nearly 1,200 jobs and is opposed by 60% of city voters. The group is lobbying for a bill in the state legislature that would preempt and eliminate the city’s beverage tax.
It remains to be seen what the state legislature decides. In the meantime, this ruling will give other cities peace of mind that there is a chance that their efforts to curtail sugar consumption and improve public health through soda taxes could have the law behind them.