The Pennsylvania Supreme Court said Tuesday that it will consider the legality of Philadelphia's tax on soda and other sweetened beverages, giving fresh hope to opponents of the controversial levy.
The court said it would hear the American Beverage Association and other local businesses' appeal of a Commonwealth Court decision last year to uphold the controversial tax. The rest of the country will be watching the outcome. Philadelphia became the first major U.S. city to pass a tax on soda in 2016, and a number of other cities have since considered or implemented similar taxes.
Justices will weigh whether the 1.5-cent-per-ounce levy amounts to a double tax. Pennsylvania law prohibits the city from imposing a levy on something already taxed by the state. The tax is imposed on distributors, but lawyers representing the beverage industry and local retailers argued that the levy is being passed on to consumers, who already pay sales tax.
Supreme Court Justice Kevin Dougherty, younger brother of John "Johnny Doc" Dougherty, business manager for Local 98 of the International Brotherhood of Electrical Workers, recused himself from the case. He was elected to the high court in 2015 with help from Local 98, and John Dougherty has been a vocal supporter of Mayor Kenney and the city's beverage tax. Kevin Dougherty also received more than $50,000 in campaign contributions from local soda mogul Harold Honickman, an opponent of the tax.
Shanin Specter, a lawyer representing a group of consumers, businesses, and trade associations, said he was pleased with the court's decision to consider the tax.
"While the City of Philadelphia has opposed Supreme Court review, it is evident that the tax poses significant legal issues," he said in a statement Tuesday. "All parties to this case — as well as local governments, businesses, and consumers across the commonwealth — will benefit from the court's assessment of state vs. local authority in taxation."
Philadelphia City Solicitor Sozi Pedro Tulante said he was not surprised by the court's action.
"Our confidence in the city's authority to impose the tax has not wavered, and we welcome the justices' thorough review of the Commonwealth Court's decision that confirmed the legality of the tax," he said in a statement. "Ultimately, we look forward to the day when the city can begin full implementation of the essential programs funded by the tax … to the benefit of tens of thousands of Philadelphia children and families."
The tax survived a legal challenge before it went into effect last January. A Philadelphia Common Pleas Court judge dismissed a lawsuit in December 2016.
Philadelphians for a Fair Future, a pro-tax coalition that receives funding from former New York City Mayor Michael Bloomberg, released a statement saying the court's order Tuesday "puts us one step closer to getting a resolution on this issue, which has enormous consequences for the city's future."
Danny Grace, secretary-treasurer of Teamsters Local 830, which represents beverage bottlers and drivers, praised the Supreme Court for considering the appeal.
"It provides our suffering membership and our city's struggling beverage companies, supermarkets, convenience stores and restaurants a sense of hope that this destructive, discriminatory tax may yet get overturned," Grace said in a statement.
The city says the tax revenues primarily are being used to fund pre-K, community schools, and improvements to parks and recreation centers. It raised $78.8 million in its first calendar year, falling short of projections. The city estimates the tax will bring in $92 million in fiscal year 2018, which ends in June, but monthly revenues have fallen short of the average needed to reach that goal.
City officials have said they are slowly ramping up the pre-K program and the effort to rebuilt of parks, recreation centers, and libraries. Only a limited number of pre-K spots will be available until litigation over the tax is settled, officials have said. Opponents of the tax claim that the city's statements have been misleading because the tax revenue goes into the city's general fund rather than an account earmarked for pre-K and other programs, and because litigation is not blocking the implementation of universal pre-K.