Philadelphia’s city council has passed a tax on soda and other sugar-sweetened beverages sold in the city, making it the first large American city to do so.
Berkeley, Calif., passed such a tax in 2014 at the rate of one cent per ounce.
Philadelphia’s tax, which will go into effect January 1, 2017, is 1.5 cents per ounce and, like the Berkeley tax, is levied on distributors.
For syrups and other concentrates, such as those used at soda fountains, the tax rate is 1.5 cents per fluid ounce of the finished drink prepared according to the manufacturer’s specifications.
The tax also affects diet sodas containing artificial sweeteners such as stevia, aspartame and sucralose, but specifically does not include baby formula; medicine; drinks that are more than 50 percent milk, fruit or vegetables by volume; or unsweetened drinks to which consumers might add sugar, such as coffee or tea. Syrups or concentrates that a customer might add by himself or herself also are not affected by the tax.
Philadelphia mayor Jim Kenney advocated for the tax, although he wanted it to be 3 cents per ounce. According to The Philadelphia Inquirer, the tax is expected to raise around $91 million per year for the city and will be spent on prekindergarten programs, community schools, parks, recreation centers and libraries, as well as a tax credit for businesses that sell healthful beverages.
The New York Times observed that similar taxes have been proposed across the country many times without success, but Kenney took a different tack — proposing it as a simple fundraising measure rather than as a “nanny state” tactic to change the drinking habits of citizens.
In fact, the compromise tax, which passed by a vote of 13-4, was only passed after it was expanded to include diet drinks, according to the Inquirer.
John Longstreet, president and CEO of the Pennsylvania Restaurant and Lodging Association, said the PR&LA objected to the tax on three grounds:
1) It’s a regressive tax that inordinately affects the poorest people in the city, many of whom get their first jobs in restaurants.
2) It’s “exorbitant,” with 5-gallon syrup bags that normally cost $20-$25 facing a tax of around $75. “It’s impossible for anybody who understands business to say that it’s not going to be passed on to the consumer,” he said.
3) In previous city referendums about a soda tax, the measure has failed. “So it’s not the will of the people,” he said.
Longstreet said he spoke to McDonald’s franchisees in Philadelphia who predicted that they would have to move soda fountains to the back of the house to be refilled by employees and would have to eliminate free refills.
“So it’s discouraging all around,” he said.
The American Beverage Association, which represents manufacturers and distributors of non-alcoholic drinks, said the tax would inordinately affect poor people. It also questioned its legality.
“The tax passed today is a regressive tax that unfairly singles out beverages — including low- and no-calorie choices. But most importantly, it is against the law,” it said in a statement. “So we will side with the majority of the people of Philadelphia who oppose this tax and take legal action to stop it.
“The fact remains that these taxes are discriminatory and highly unpopular — not only with Philadelphians but with all Americans. Similar tax proposals have been rejected 43 times across the country in the past eight years, including twice in Philadelphia.”
In a commentary in the Philadelphia Inquirer, forwarded to NRN by the ABA, former chief justice of Pennsylvania Ronald Castille argued that the tax is “a thinly disguised sales tax,” and is in violation of the state constitution’s “uniformity clause,” which states that taxes must be uniform across the state.
Organizations advocating for reduction in the amount of sugar in the American diet hailed the tax.
“The bold action by Philadelphia’s mayor and city council, in the face of $5 million worth of industry pressure, is a win not just for the health and well-being of Philadelphia kids but for communities across the country,” Jim Krieger, executive director of Healthy Food America, which advocates for soda taxes, said in a statement. “The move to recapture a sliver of profits from an industry that pushes a product that contributes to diabetes, obesity and heart disease in poorer communities in order to reinvest in those communities is sure to be inspirational to many other places.”
Former New York City mayor Michael Bloomberg, who tried to ban the sale sugar-sweetened beverages in portions larger than 16 ounces in New York, congratulated Philadelphia’s government on the tax, which he actively supported: The billionaire former mayor reportedly spent $1.6 million supporting the measure.
“Obesity and poverty are both intractable national problems. No policy takes more direct aim at both than Philadelphia’s tax on sugary drinks,” he said in a statement on his web site.
Contact Bret Thorn at [email protected]
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