Will the Philadelphia tax on sweetened drinks get its day in court before it goes into effect? It’s a question now in front of Pennsylvania’s highest court.
Philadelphia’s legal team has fired back at the American Beverage Association’s lawsuit seeking to kill Mayor Jim Kenney’s tax on soda and other sweetened drinks, terming it “the resurrection of a lost political battle masquerading as a civil complaint.”
The ABA’s broad-based assault on Kenney’s tax to fund expanded pre-kindergarten and other services “rests upon a kitchen-sink of flawed” arguments, wrote attorney Ken Trujillo in a response to the soda industry’s lawsuit.
The ABA had asked that the Pennsylvania Supreme Court to immediately consider the dispute by invoking a rare path to the high court known as King’s Bench jurisdiction, which allows disputes to be heard by the state’s top court when an issue has “immediate public importance.”
City officials are fine with that, but say having a decision before the 1.5 cents-per-ounce tax goes into effect, or by Dec. 31, as the ABA requested, is unreasonable.
Instead, the city has asked that the court give Philadelphia’s legal team at least four months to fully develop its legal argument.
The ABA isn’t happy about that.
“If the city gets their way, the legality of the tax will not be decided until long after it goes into effect. If the tax is then voided by the courts, consumers who’ve been hurt by the tax won’t be able to get their money back. That’s simply wrong,” said attorney Shanin Specter, who is representing the ABA and other plaintiffs.
In June, the City Council passed the tax by a 13-4 vote; shortly after that, Kenney signed it into law. It’s supposed to go into effect at the start of next year. The city’s attorneys say the first tax collection deadline is Feb 20.
Kenney’s legal team said funding expanded pre-K will help close the achievement gap between low-income and higher-income students. And that improving parks, libraries and recreation centers will benefit many in the city.
In giving a short preview of its response to the ABA’s challenge, the city primarily doubles down on a point officials have made before: Because the tax is being imposed on distributors, not at the point of sale, the argument that it’s a double tax does not hold up. On top of that, state law allows cities to tax in areas in which the commonwealth does not already tax, such as sweetened-drink distributorship.
“Taking the powers of local government away — especially in a case like this — is to hobble local government henceforth. Fortunately, the law offers the beverage industry no basis to do so,” wrote Trujillo.
On what some legal observes saw as the beverage industry’s most creative legal approach — that purchases by SNAP (formerly known as food stamps) recipients would be taxed, thus possibly jeopardizing state participation in the program — Trujillo took a quick jab at it in a footnote of the city’s response.
“A distributor’s inclusion of a cost of a tax in the distributor’s overhead and price does not mean the down-the-line customer actually uses federal monies to pay the tax,” he wrote. To put it another way, a distributor’s choice to offload some of the tax onto consumers is not forcing those receiving federal assistance to pay a city tax.