Philadelphia soda tax upheld by Penn. Supreme Court: “The payer of the beverage tax is … never the purchasing consumer.”

The Pennsylvania Supreme Court ruled that Philadelphia’s controversial soda tax is constitutional. The Philadelphia Inquirer reports,

In a 4-2 majority opinion, the court found that the city had not violated state law by taxing the distribution of beverages. Opponents of the tax had argued that the levy amounted to double taxation because it is passed down to consumers who already pay sales taxes.

The Associated Press quotes from the majority opinion.

“The payer of the beverage tax is the distributor, or in certain circumstances, dealers, but never the purchasing consumer,” wrote Chief Justice Thomas Saylor for the majority.

To us, that sounds like bad economics, which appears to be the view of the dissenters, as well.

Both dissenting justices said the tax does duplicate taxes already in place on retail sales of soda in the city, violating the Depression-era Sterling Act.

“A rose by any other name smells just as sweet, and, whether styled a retail tax or a distribution tax, the levy here at bar, like the state sales tax, raises revenue specifically by burdening the proceeds from the retail sale of sugar-sweetened beverages,” wrote Justice David Wecht, who dissented.

The Pennsylvania decision is of interest here because the Philly soda tax preceded the Seattle soda tax, which also was imposed by a city council that designed it as a tax on distributors

Because the city will collect the tax from distributors rather than consumers, some of the rules are complicated. For example, a box of syrup distributed for use in a soda fountain will be taxed on the volume of beverage the syrup is capable of producing.

Retailers won’t be allowed to dodge the tax by using distributors outside the city. A retailer bringing drinks into Seattle will be considered a distributor and will pay the tax.

The above quote comes from a Seattle Times headlined, “Prices going up for sugary drinks as Seattle tax kicks in.” Consumer, of course, pay the price.

Last year, the Wall Street Journal editorial board noted the effects of the Philadelphia soda tax. 

The best laid plans of politicians often go awry, and then there’s Philadelphia’s soda tax. A new Tax Foundation report finds that the 1.5-cent-an-ounce levy that took effect in January is hurting low-income workers and producing less revenue than promised, but at least it’s helping beer sales. Allow us to explain.

…Actual soda tax collections in the first six months were already $6.9 million below the city’s estimate of $46.2 million.

This is no surprise to anyone who knows the iron economic law that when you tax something you get less of it.

The editorial, which is worth reading in its entirety, concludes with the common sense observation: “…other cities might note that excise taxes don’t repeal the laws of economics.”

Washington voters are likely to have a chance to vote on whether other cities in the state are able to impose a soda tax. Initiative 1634 would preempt local authority to levy soda and grocery taxes