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Judge Dismisses Lawsuit Challenging Philadelphia’s Sugary Drinks Tax; Beverage Industry to Appeal

Philadelphia’s 1.5-cent-an-ounce tax on sugary drinks survived a major challenge Monday from the beverage industry, after a city judge dismissed the group’s lawsuit. But the issue isn’t over.



sodataxlawsuitdropped.PNG“We shall appeal,” said Shanin Specter, who represents the American Beverage Association and a few restaurants and consumers who filed a lawsuit a few months after the city passed the so-called soda tax in June.

Since then, drink manufacturers, consumers, distributors and government officials have been on alert for a ruling from Common Pleas Court Judge Gary S. Glazer, who’d said he would decide the case before 2017.

Glazer’s ruling Monday tossed out the entire suit, and refuted the ABA’s contention that the drink tax was against the law because it was duplicative of the state’s sales and use tax. “The respective taxes apply to two different transactions, have two different measures and are paid by different taxpayers,” the judge said.

The tax is imposed on distributors, and it applies to sodas, teas, energy drinks and other beverages, but excludes others such as drinks with more than 50 percent milk, fresh fruit or vegetables.

The ruling also dismissed the idea that the tax violated the “uniformity clause” of Pennsylvania’s constitution requiring taxpayers in a given group to be treated the same.

“Here the distributors are taxed based on volume, in similar fashion to fuels and alcoholic beverages,” Glazer said. “The Uniformity Clause does not require absolute equality and perfect uniformity in taxation, and any doubts as to the constitutionality of the statute are to be resolved in upholding the statute. … It is the responsibility of the legislature to question whether the tax is equitable and just.”

Philadelphia Mayor Jim Kenney said in a statement he hopes the beverage industry doesn’t follow through on its pledge to appeal. He called the ruling a victory for city residents waiting for investment in education and their neighborhoods.

“I urge the soda industry to accept the judge’s ruling and do the right thing for the children of Philadelphia, many of whom struggle in the chilling grip of pervasive poverty,” Kenney said. “The industry has chosen not to challenge beverage taxes in other municipalities and there is no reason to continue pursuing it here.”

Even before the ruling, the city had pushed ahead with plans to collect the tax, setting up an information site for distributors and consumers. Beverage distributors are supposed to register before Jan. 1, 2017, with the first tax return and payment due on Feb. 20.

It’s expected to bring in about $91 million annually, which the city plans to use to expand pre-Kindergarten programs, improve parks and offer tax credits for businesses that sell healthy beverages. Officials already have budgeted $12 million for the first year of pre-K, which begins in January.

So far, including Philadelphia, eight areas around the country have passed a sugary drinks tax, either through voter approval or governmental action. Health advocates say reducing consumption will help put a dent in heart-impacting illnesses such as diabetes and obesity.

American Heart Association Chief Executive Officer Nancy Brown said she hopes the experience in Philadelphia will embolden others. The AHA has helped advocate for the tax in several areas around the country.

“This important ruling marks a huge victory for the city of Philadelphia and the health of its residents. We hope other cities will follow in taking a stand against Big Soda.”

The nonprofit Healthy Food America asked Harvard University’s Childhood Obesity Intervention Cost-Effectiveness, or CHOICES, project to predict what would happen if 15 more of the nation’s largest cities adopted a sugary drinks tax of one cent per ounce.

That computer simulation released last week showed that, with the six jurisdictions that passed the tax in 2016, a penny-per-ounce tax would save thousands of lives and more than $1.2 billion in healthcare costs over a decade. It also said governments would collect nearly $1 billion in revenue.

“We project that municipal SSB (sugar sweetened beverage) excise taxes in these cities of $0.01/ounce will prevent 115,000 cases of childhood and adult obesity in 2025, prevent many new cases of diabetes, increase healthy life years and save more in future health care costs than the intervention costs to implement,” the report authors said. “Revenue from the tax can be used for education and health promotion efforts. Implementing the tax could also serve as a powerful social signal to reduce sugar consumption.”

The 15 cities in the analysis are: Baltimore, Charlotte, Columbus, Denver, Detroit, Indianapolis, Jacksonville, Las Vegas, Los Angeles, Louisville, Oklahoma City, Phoenix, San Diego, San Jose and Seattle.

Healthy Food America’s executive director, Jim Krieger, said these and other “cities have a golden opportunity to help their people avoid premature death and illness and cut health costs while raising revenue to make residents’ lives better in other ways.”

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