Pennsylvania’s highest court said Tuesday that it will hear an appeal in a lawsuit challenging Philadelphia’s year-old tax on soda and other sweetened drinks that inspired other cities around the country to enact their own.
The Pennsylvania Supreme Court issued a brief order, saying it would hear the appeal by the industry, restaurants and retailers on whether the tax violates a 1932 law prohibiting Philadelphia from taxing a transaction or subject already taxed by the state.
The city’s lawyers said they expected the high court’s review and maintained that they are confident the city has the authority to enforce the tax, which is imposed on distributors. A lawyer for the business owners and organizations suing said he was “heartened” by the court’s decision to review the tax.
City officials say the tax revenue — designed to help pay for pre-kindergarten, community centers, libraries and parks and recreation centers — can eventually benefit tens of thousands of children and families. Proponents also say the tax encourages healthier dietary habits and attacks a key culprit in obesity, while opponents say it is causing layoffs and is hurting small businesses.
Plaintiffs include the American Beverage Association and the Pennsylvania Food Merchants Association.
Philadelphia’s enactment of the tax inspired other municipalities to follow suit, with varying results.
Seattle, San Francisco, Oakland, and Boulder, Colorado, also approved new taxes on soda. Voters in Santa Fe, New Mexico, rejected a similar measure while Illinois’ Cook County — which includes Chicago — passed and repealed one amid a backlash and Michigan’s Republican-led state government imposed a ban on such municipal taxes.
In Pennsylvania, a lower court last June upheld Philadelphia’s 1.5-cent-per-ounce tax on sweetened beverages. That court’s 5-2 majority said the beverage tax doesn’t duplicate the state sales tax because it is imposed on distributors and thus hits a different target.
If fully passed onto consumers, the tax is $1.44 on a six-pack of 16-ounce bottles.
The beverage tax raised almost $79 million in 2017, its first 12 months, according to city officials, slightly below initial projections of $92 million a year.
City officials said they have held back on using all of the proceeds from the tax because of the potential that it could be overturned in court.
Thus far, the money has been used to underwrite pre-kindergarten for 2,700 children whose families have an average income of just below $32,000 and 11 community centers for 6,000 students, most whom live at or below the poverty line, city officials said.
While the litigation is alive, the city has postponed floating a bond to improve parks, recreation centers, playgrounds and libraries.