Appeal ‘Needlessly Delaying’ Philadelphia Soda Tax: City

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Leslie A. Pappas

Philadelphia’s soda tax is a lawful levy necessary for “crucially important” city programs that doesn’t need to be litigated further, the city told the Pennsylvania Supreme Court ( Williams v. Philadelphia , Pa., Nos. 321 and 322 EAL 2017, brief filed 7/31/17 ).

Two lower courts have already found that Philadelphia’s 1.5-cent-per-ounce tax on sweetened beverages is legal because it isn’t a duplicative sales tax and is applied in a uniform way, the city argued in a July 31 brief. The city plans to use the tax to fund pre-Kindergarten programs, community schools, and infrastructure improvements to parks, rec centers, playgrounds, and libraries.

“This simply is not the sort of ruling that necessitates this Court’s review—especially when another round of litigation will only continue to needlessly delay the City’s full implementation of critical programs,” according to the brief.

The city’s brief opposes an appeal petition filed by a coalition of businesses and trade groups including the American Beverage Association, which represents beverage makers such as Coca-Cola Co. and PepsiCo Inc. The coalition is seeking review of a June 14 decision by Pennsylvania’s Commonwealth Court that upheld the tax.

‘Shockingly Crass’

Shanin Specter of Kline & Specter PC in Philadelphia, counsel for the coalition, told Bloomberg BNA Aug. 2 in an emailed statement that it is “shockingly crass and political for the City’s lead argument to be that the tax should be upheld because the soda tax money is needed, instead of arguing that the soda tax is legal.”

The argument is “especially ironic” because the mayor has said he will continue pre-Kindergarten programs even if the soda tax is voided, Specter said.

However, Philadelphia Mayor Jim Kenney’s (D) spokesman, Mike Dunn, told Bloomberg BNA that the mayor hasn’t said that.

“There has been no revenue identified that would allow the pre-K program to continue without revenue from the beverage tax,” Dunn said in an email. “The two thousand seats currently filled are funded with beverage tax money and if the tax goes away, those children are without free pre-K.”

Specter responded with a link to a video interview the mayor did in March, during which Kenney said he would “keep pre-K, but not at the same level.”

$39.3 Million

Preliminary figures show the city collected $39.3 million from the beverage tax between Jan. 1, when the tax took effect, and June 30, the end of fiscal year 2017. That falls short of the $46.2 million the city originally projected the tax would collect in fiscal year 2017—however, it’s only about $300,000 shy of the city’s revised forecast in its most recent five-year plan that projected beverage tax revenue for fiscal year 2017 at $39.7 million, Dunn said.

“We remain confident that the beverage tax is and will remain a reliable source of revenue, to the benefit of thousands of Philadelphian families and children,” Dunn told Bloomberg BNA. “Remember, the tax brought in nearly $40 million in its first six months. That is significant revenue that has already allowed nearly 2,000 three- and four-year-olds to attend free quality pre-K, created more than 250 jobs and allowed 4,500 neighborhood public school students to attend community schools.”

Former New York Mayor Michael Bloomberg, founder of Bloomberg L.P., has donated to groups that support Philadelphia’s soda tax. Bloomberg BNA is an affiliate of Bloomberg L.P., the global business, financial information, and news leader.

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at LPappas@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

For More Information

Text of the brief is at http://src.bna.com/rkn.

Copyright © 2017 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State