Philadelphia’s soda tax has had a rocky record of underperformance and volatility. We first wrote about the tax shortly after it was adopted in 2016. We asked the Philly folly was going to launch a trend. Well, as we know, Seattle eventually followed suit.
Charles Hughes at E21 writes that the experiment in Philadelphia is going about as well as most critics expected.
In unsurprising news, Philadelphia Mayor Jim Kenney’s budget proposal reduced the projected revenues from the city’s beverage tax by about 15 percent. For a multitude of reasons, revenues have not met expectations.
Soda tax revenue was already earmarked as the funding source for new pre-K seats, community schools, and other programs. As a result of missed revenue targets, these planned initiatives are adversely affected and have been scaled back. The unpopular soda tax was initially sold in part as a way to finance these programs that generally enjoy widespread support from voters. So far, the record shows these taxes cannot reliably be counted on to generate the projected amount of revenue.
Philadelphia became the first city to pass a sweetened beverage tax in 2016, and the 1.5 cent-per-ounce tax on the supply of sweetened beverages to retail dealers came into effect in January 2017. Other jurisdictions such as San Francisco, Seattle, and Cook County (Illinois) quickly followed suit. These efforts have also been beset by problems and the Cook County tax has already been repealed.
An initiative has been introduced to ban local soda taxes in Washington, we noted last week. Seattle’s existing tax, reportedly, would not be affected. Hughes reports on a novel challenge to the Philadelphia tax.
The Pennsylvania Supreme Court indicated in January that it will consider the legality of the tax. The plaintiffs, among them a collection of retailers and the American Beverage Association, argue that although the tax nominally is levied on distributors, it is passed on to consumers. Because consumers already pay sales tax, this group claims this amounts to double taxation, which is prohibited by the state’s Sterling Act. If the case is decided for the plaintiffs, it could portend a wave of court challenges to soda taxes. Even if the case is decided in favor of Philadelphia, the uncertainty has already slowed the rollout of the promised programs to be funded by the beverage tax.
Worth watching. And it makes you wonder why any city would tie the funding of important and popular programs to the volatile revenue stream uncertainly flowing from an unpopular tax.