A group of opponents of Philadelphia’s soda tax are suing the city to kill the levy before it takes effect next year.
Statewide beverage associations and restaurants, including John’s Roast Pork and City View pizza, are asking the Common Pleas Court to declare the tax illegal. The tax was passed by City Council and signed by Mayor Kenney in June.
“In light of the sweeping scope and excessive burden of the Philadelphia Soft Drink Tax, the tax will detrimentally affect every soft drink retailer and distributor and all consumers who purchase affected beverages in the city,” the lawsuit argues.
Philadelphia became the first big city in the country to pass a soda tax with the mayor leading the charge. Shortly after moving into City Hall, Kenney proposed a tax of three cents per ounce on soda to finance universal pre-kindergarten, communiy schools and improvements for parks and recreation centers in Philadelphia. A chunk of the revenue, less than 20 percent, will go towards the city's Fund Balance until 2020.
During wrangling in City Council, the tax was changed to 1.5 cents per ounce, and now includes sweetened beverages such as diet soda.
Opponents have long argued the burden of the tax would be passed on to customers, and John Bucci Jr., owner of John's Roast Pork, says in an affidavit attached to the suit that the tax would hurt his business.
"I intend to transfer to John's Roast Pork customers any portion of the Philadelphia Sweetened Beverage Tax that is passed on to John's Roast Pork by its distributor," Bucci wrote in a signed declaration. "An increase in the price of sweetened beverages will result in decreased sales volume ... [and] fewer customers visiting John's Roast Pork, as well as a loss of customers."
According to lawyer Shanin Specter, who is handling the suit, the tax “is plainly illegal.”
Plaintiffs argue Philadelphia cannot legally impose a tax that is not imposed elsewhere in the state. They also claim it is illegal to have a tax that varies depending on the size of the beverage. The tax would amount to a 1.17 percent cost increase for a two-ounce 5-hour Energy, but it would be a 149.12 percent increase for a two-liter bottle of soda.
Specter added that the soda tax will also act as a tax on federal SNAP benefits, which are received by 31 percent of Philadelphians and are required to be tax-exempt. He argued the tax could funnel $23 million from federal coffers to city government.
“When you go the register, if you’re a SNAP beneficiary, it will still be exempt from sales and city tax. But the increased price from the Philadelphia soft drink tax will still be embedded in the price of the item,” Specter argued. “It demonstrates that this tax hits the most needy Philadelphians the hardest, and it comes straight out of the federal treasury. That’s a no-no.”
City officials responded that the tax is proper, legal and will be upheld in court.
"We are ready and prepared to vigorously defend this legislation and to protect the historic investment planned for Philadelphia’s neighborhoods and education system," city solicitor Sozi Pedro Tulante said in a statement.
Mayor Kenney took a harsh stance, calling the suit a "repugnant" attempt to limit the tax from benefitting pre-K, libraries, rec centers, schools and other programs.
"While it is repugnant that the multi-billion-dollar soda industry would try to take away these educational and community programs from the hundreds of thousands of Philadelphians who need them, we were not surprised by their lawsuit given the ten million dollars they have already spent opposing the tax," Kenney said in a statement. "I have no doubt we’ll be successful in defeating the lawsuit."